Asian FX set for half-year losses on rate hikes, inflation woes
All emerging Asian currencies were set for half-yearly
losses on Thursday, with the South Korean won set to lose the most, as policy
tightening by the U.S. central bank and concerns over global economic outlook
spurred selling in Asian assets.
The won dropped 8.4% so far this year, while the Philippine peso
and Indian rupee were on track to post half-yearly losses of
7.3% and 5.8%, respectively.
Emerging markets in the six-month period were battered by capital outflows
due to the U.S. Federal Reserve kicking off its tightening cycle, Russia’s
invasion of Ukraine, and inflation from higher commodity prices.
Among local drivers, China’s insistence on a zero-COVID policy also spurred
selling as the country’s repeated imposition of restrictions means a slower
economic recovery for the region’s largest economy.
“The broader market … they need some more convincing because I think at
the back of their mind, they’ve still got this hesitancy due to the ongoing zero
COVID policy,” said Stephen Innes, managing partner at SPI Asset Management.
Nearly all stock markets in Asia were set for half-yearly losses, although
markets in Indonesia climbed 5.3%, with many coal miners seeing sharp
gains amid soaring energy prices.
For the day, most Asian currencies weakened as even more hawkish signaling
from the Fed and China’s weaker-than-expected factory and services data kept a
lid on investor sentiment.
The Indonesian rupiah shed 0.3%, and was set to lose 4.3% for the
half year. The Thai baht lost 0.2%, on track to drop 5.4% so far this
Fed Chair Jerome Powell said overnight there was a risk that the planned
policy tightening might slow down the economy too much, as he reaffirmed the
central bank’s commitment to fight inflation.
“The messaging reinforces the notion that the current economic landscape is
operating in a higher rates environment,” analysts at Maybank said in a note.
However, the Singapore dollar edged up 0.2% and was set to be the
best-performing Asian currency in the six-month period, losing just 3%.
Philippines’ incoming central bank governor said he would consider more
aggressive rate hikes to support the local currency.
The country’s new president, the son and namesake of late dictator Ferdinand
Marcos, also swore in.
The peso rose early in the trading day, but settled about 0.1% lower.
Stocks in the region traded mixed, with Philippine stocks and Thai
stocks shedding 2.3% and 0.8%, respectively, while Chinese and
Malaysian rose 1.1% and 0.3%, respectively.
** Indonesian mining firms Bayan Resources and Astrindo Nusantara
Infrastruktur more than doubled their market capitalisations this
** International Monetary Fund says it had constructive and productive
discussions with Sri Lankan authorities amid financial crisis, to reach
agreement on fund facility arrangement in near term
** Japan factory output in May falls 7.2% month-on-month, the sharpest
monthly drop since May 2020, well below expectations
Asia stock indexes and currencies at
COUNTRY FX RIC FX FX YTD INDEX STOCKS STOCKS
DAILY % % DAILY YTD %
Japan +0.42 -15.39 -1.54 -8.33
China +0.07 -5.08 1.10 -6.63
India +0.04 -5.83 0.02 -8.94
Indonesia -0.31 -4.33 -0.21 5.26
Malaysia -0.15 -5.46 0.31 -7.11
Philippines -0.09 -7.27 -2.34 -13.58
S.Korea +0.05 -8.44 -1.91 -21.66
Singapore +0.20 -3.00 -0.67 -0.32
Taiwan -0.15 -6.85 -2.72 -18.62
Thailand -0.18 -5.42 -0.81 -5.08
(Reporting by Harshita Swaminathan; Editing by Sherry Jacob-Phillips)