Asian FX weakens on dollar strength, Indian rupee top laggard

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Asian currencies broadly weakened on

Monday ahead of crucial U.S. consumer inflation data due this

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week, which could provide further clues on the Federal Reserve’s

policy tightening path.

The rupee depreciated 0.6% as investors braced for

India’s November inflation print, which will be released later

in the day.

India’s inflation, which has stayed above the upper end of

the Reserve Bank of India’s 2%-6% tolerance band all year,

likely cooled to a nine-month low of 6.40% in November,

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according to a Reuters poll of economists.

Currencies elsewhere in the region also declined. Malaysia’s

ringgit fell 0.3% and the South Korean won

dipped 0.5%. The Philippine peso fell 0.6% to lead

regional losses.

As concerns over a potential recession in major economies

grow, investors are considering how the U.S. inflation print due

on Tuesday will affect the Fed’s interest rate hike trajectory

over the coming months.

The Fed is widely expected to raise rates by 50 basis points

on Wednesday at its last meeting of 2022, though the focus will

also be on the central bank’s updated economic projections and

Fed Chair Jerome Powell’s press conference.

Meanwhile, data released last week showed Philippine annual

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inflation surged to a 14-year high in November, with a pickup in

prices seen supporting the case for a half-percentage point

interest rate hike this month.

Analysts at ING expect the country’s central bank to retain

its hawkish stance next year, taking into account the elevated

inflation levels.

Stocks in Manila, however, advanced 0.7%.

In Taiwan, the central bank is likely to lift the benchmark

discount rate by 12.5 basis points to 1.75% at its

quarterly meeting on Thursday, according to 23 economists

surveyed by Reuters.

“Emerging Asia’s hiking cycle generally has yet to end as

high inflation continues to keep the central banks on a

tightening path,” Analysts at Barclays said.

“Demand-pull inflation pressures remain relatively steady

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across Emerging Asia, which should overall keep the region’s

central banks closer to the hawkish, rather than dovish, end of

the policy spectrum,” they added.

Stocks across the region were largely subdued on Monday.

Markets in Shanghai and Kuala Lumpur fell 0.3%,

while Jakarta added 0.1%.

Markets in Thailand were closed for a public holiday.

HIGHLIGHTS:

** Indonesian 10-year benchmark yields fall 1.2 basis points

to 6.946%

** Malaysia’s October factory output up 4.6% Vs Reuters poll

of 8.1% rise

** U.S. Nov producer price index for final demand rose 7.4%

y-o-y

Asia stock indexes and currencies

at 0700 GMT

COUNTRY FX RIC FX FX INDEX STOCKS STOCKS

DAILY % YTD % DAILY YTD %

%

Japan -0.24 -15.9 -0.21% -3.30%

3

China

India -0.37 -9.99 -0.05 6.53

Indonesia -0.28 -8.80 -0.09 1.94

Malaysia -0.32 -5.69 -0.33 -4.24

Philippin -0.36 -8.21 0.23 -7.40

es

S.Korea

Singapore -0.06 -0.33 -0.09 3.83

Taiwan -0.30 -9.89 -0.63 -19.79

Thailand – -3.98 – -2.08

(Reporting by Roushni Nair in Bengaluru; editing by Uttaresh.V)