(June 18): Most emerging Asian currencies weakened against a firmer dollar on Thursday, with the Malaysian ringgit hitting a six-month low after the US Federal Reserve held rates steady, even as nearly half of policymakers projected a rate hike later this year.
The MSCI’s broader gauge of global EM currencies slipped 0.4%, as the dollar index, which measures the greenback against a basket of major currencies, held firm around 100.2 after shooting up to a two-month high.
The Fed kept its benchmark rate unchanged as new Chair Kevin Warsh began his tenure with a broad policy review, though nearly half of officials now see rates rising this year amid growing inflation concerns.
“We will continue to see Asian currency markets continue to price in a higher for longer U.S. rate environment,” said Lloyd Chan, a senior currency analyst at MUFG.
“A higher-for-longer US rates environment is a headwind, particularly for low-yielding currencies.”
The Malaysian ringgit fell as much as 0.6% to 4.089 against the dollar, its weakest point since mid-December last year. The South Korean won depreciated to 1,525.5 per dollar, its lowest in about a week.
The Philippine peso and the Indonesian rupiah slipped ahead of the respective central bank monetary policy meetings later in the day, where both the Bangko Sentral ng Pilipinas and Bank Indonesia are expected to hike interest rates, according to Reuters polls.
South Korea & Singapore stocks at records
Most Asian EM equities were up on the day, with stocks in South Korea rising more than 1.5% to top the 9,000 mark for the first time. That, alongside a near 1% gain in Taiwan’s main gauge sent MSCI’s EM Asia equities index to its highest in two weeks.
Singapore’s FTSE Straits Times index inched higher to touch a record high, building on Wednesday’s 1.2% gains and marking its sixth consecutive session of gains.
Shares in the Philippines advanced 0.8%, while those in Malaysia and Thailand were range-bound.
Indonesia’s Jakarta Composite Index fell as much as 2.4%, while the rupiah weakened to 17,865 against the dollar ahead of the central bank’s interest rate call.
Chan added that the country’s central bank is biased towards policy tightening due to continued weakness in the rupiah, with the upcoming MSCI global market accessibility review also a key liquidity event for the currency.
The rupiah has repeatedly hit record lows this year, weighed down by concerns over President Prabowo Subianto’s fiscal policy and oil price volatility amid Middle East tensions, which are straining its current account.
Markets are also awaiting Taiwan’s monetary policy decision, where its central bank is expected to keep interest rates unchanged, a Reuters poll showed.
Uploaded by Lam Seng Fatt
