Saturday, March 18, 2023

Asian currencies drop due to concerns about rate hikes, and stocks are down.

On Tuesday, ASIAN currencies and stocks were mixed as concerns about potential future interest rate increases by the U.S. Federal Reserve lingered, and the Thai baht was expected to have its worst month in 23 years.

The Philippine peso increased by 0.6%, but it was about to end a winning streak of four months. Malaysia's ringgit decreased 0.2%, while the Indonesian rupiah increased 0.2%.

The baht lost 0.5% of its value. The currency's decline in February was 6.4%, the largest monthly decline since September 1999.

The Bank of Thailand estimates that the economy of the nation would expand by 3% to 4% this year, and that inflation, which is presently at 5.02%, will drop to within the 1% to 3% range that the central bank had set as its target range in the second half of 2023.

Asian currencies drop due to concerns about rate hikes, and stocks are down.

The world's largest economy continues to remain strong, and recent positive economic data from the United States has increased hopes that the Fed would raise interest rates more aggressively.

The Fed will likely raise rates a third time this year by 25 basis points, and the market now anticipates a 5.4% peak in rates by September.

According to Michael Loh, Asia FX strategist at BNP Paribas, "U.S. inflation is proving to be stickier than projected, in contrast to many Asian nations where inflationary supply shocks from energy and food have passed."

"As a result, this is causing monetary policy divergence both within the area and in comparison to the United States."

Since January, most central banks in Southeast Asia have scaled back their tightening of monetary and financial conditions. The Bank of Thailand has hinted at future gradual tightening while the central bank of Malaysia surprisingly took a break.

The dollar index, which compares the value of the dollar to six other currencies, increased by 0.2% to 104.81 and is now aiming for its first monthly gain of more than 2.5% since September.

OCBC analysts maintained their belief that the upside for the dollar may be constrained as Fed tightening enters its late cycle, even though the U.S. dollar may be supported for the time being as markets re-price a higher top.

Stocks in Manila rose 0.7% to lead gains among the regional equities markets. While stocks in Jakarta and shares in Kuala Lumpur both down 0.1%, Singapore's benchmark index increased by 0.4%.


Thailand's manufacturing production index fell by 4.35% less than anticipated in January compared to a year earlier as exports were negatively impacted by the global recession.

** Markets anticipate India's Q3 GDP numbers for fiscal year 2022–2023, which are expected to increase by 4.6% year over year from the previous quarter's 6.3%.

The possibility of a quick revision to ultra-loose monetary policy was dismissed by newly appointed Bank of Japan deputy governor Shinichi Uchida, according to Reuters.

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Asian currencies drop due to concerns about rate hikes, and stocks are down.