Asia FX falls as Powell remarks buoy dollar; won, baht take beating

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Emerging Asian currencies weakened on

Monday as the Federal Reserve signaled a longer duration of

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higher rates to tame soaring inflation, lifting the U.S. dollar

to a 20-year high and hitting Thailand’s baht and South Korea’s

won particularly hard.

Indonesia’s rupiah and the Philippine peso

weakened 0.4% and 0.1%, respectively, while Singapore’s dollar

fell 0.4% to a more than one-month low.

The dollar index, which tracks the currency against

six major peers, rose 0.2%, pressuring most regional currencies,

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after Fed Chair Jerome Powell’s hawkish remarks at the Jackson

Hole symposium on Friday.

Powell said the Fed will raise rates as high as needed to

restrict growth, and would keep them there “for some time” to

bring down inflation.

The greenback’s 14% gain so far this year has been a major

headwind for emerging currencies as rising consumer prices

forced the Fed to rapidly raise interest rates from their

record-lows.

“Powell’s invocation of ‘rational inattention’,

highlighting risks of high inflation-expectations feedback,

gives a glimpse of a greater hawkish bias than previously

assessed,” said Vishnu Varathan, head of economics & strategy at

Mizuho Bank.

The baht slumped 1% and was among the region’s

biggest underperformers after data on Friday showed July exports

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rose at their slowest pace in more than a year. While the broad

dollar strength has hurt the baht, Thailand has also been a

regional laggard in raising rates, further widening the

U.S.-Thai yield gulf.

Malaysia’s ringgit fell 0.5%. The country’s consumer

price index rose 4.4% in July from a year earlier, in line with

forecast.

South Korea’s won declined 1.4% to its lowest in

over 13 years.

Bank of Korea Governor Rhee Chang-yong told Reuters over

the weekend that the bank must keep raising rates until the rate

of inflation was in decline, adding that a halt to policy

tightening could not occur before the Fed.

The governor also said that speculators weren’t behind the

won’s sell-off. The currency has lost over 11% so far this year.

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“The hiking cycle may be extended into the early part of

2023, while another 50 bp (basis points) hike cannot be ruled

out after last week’s 25 bp hike with upward revisions in

inflation,” analysts at OCBC Bank said in a note.

Stocks in Seoul dropped 2.3% and were set to mark

their worst day in more than two months amid the broader

risk-off sentiment.

Equities in the rest of emerging Asia were mixed with

Thailand’s benchmark index and stocks in Indonesia

retreating 1.3% and 0.7%, respectively.

Share markets in the Philippines were closed on account of a

public holiday.

HIGHLIGHTS:

** India likely recorded strong double-digit economic growth

in the last quarter of 2022, according to a Reuters poll

** Samsung Electronics, SK Hynix,

and LG Energy Solution among top losers on South

Korea’s benchmark index

The following table shows rates for Asian currencies against

the dollar at 0428 GMT.

COUNTRY FX RIC FX FX INDE STOCKS STOCKS

DAILY % YTD % X DAILY YTD %

%

Japan -0.84 -17.0 <.n2>

China EC>

India -0.21 -7.12 <.ns ei>

Indonesi -0.44 -4.23 <.jk a se>

Malaysia -0.47 -7.18 <.kl se>

Philippi -0.05 -9.27 <.ps nes i>

S.Korea 1 11>

Singapor -0.39 -3.57 <.st e i>

Taiwan -0.55 -8.87 <.tw ii>

Thailand -1.04 -8.27 <.se ti>

(Reporting by Upasana Singh in Bengaluru)