Asian stocks, currencies shaken by US inflation, Thai baht stable

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BENGALURU (June 13): The baht stabilized on Monday after Thailand’s central bank signaled gradual rate hikes to curb inflation, while other Asian currencies were hit by surprisingly high US inflation and the fears of an economic slowdown in China.

The Indonesian rupiah fell nearly 0.9% to its lowest level since May 19, while the South Korean won underperformed the most with a 1.2% drop, slipping for a third session consecutive.

The baht traded largely unchanged after Thailand’s central bank governor said rate hikes would not be delayed too long given soaring inflation, prompting economists to predict an imminent hike .

Last week, the central bank left its key rate unchanged at a record low 0.5% in a 4-3 split vote.

U.S. consumer prices accelerated in May, dashing hopes that inflation had peaked, and investors rushed to price in even bigger rate hikes from the Federal Reserve.

This pushed the US dollar higher, putting pressure on other regional currencies, with the Malaysian ringgit down 0.3%, the Indian rupee down 0.4% and the peso down 0.4%. Filipino.

The Indian rupee hit a record high when trading opened on Monday, as bond yields hit their highest levels in more than three years.

Efforts to reduce inflation will remain in focus this week, with the Fed and Bank of England expected to hike rates, while other central banks in emerging Asia have become more hawkish in recent months.

Bigger than expected rate hikes in India and Australia have added to the aggressive narrative of recent weeks.

Additionally, investors were also concerned about a resumption of Covid-19 lockdowns in China.

Stock markets fell sharply. Stocks in South Korea extended their slump to fall 3.5%, while those in Taiwan and India fell more than 2%. Shares in Malaysia, Jakarta and Thailand followed suit, down 1.4% and 1.9% respectively.

“More volatility is expected in (global) markets over the coming week, with equities likely to come under selling pressure and bond yields possibly rising gradually,” OCBC analysts said in a statement. note.

Evolving political risks in Thailand, Indonesia and Malaysia will add to a long list of pressures these economies are already facing, including the prospect of stagflation and significantly tighter monetary policy, Vishnu said. Varathan, strategist at Mizuho Bank.

Strong points:

  • Singapore’s five-year benchmark yield up 22.1 basis points to 2.925%
  • Indonesia’s 10-year benchmark rose 6 basis points to 7.281%
  • South Korea’s foreign exchange authority said on Monday it was monitoring any speculative movement in the currency market and working to mitigate any herd behavior.
  • Philippines central bank governor says country’s monetary policy actions are unrelated to US Federal Reserve decisions
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