Thailand
Asian currencies face weekly losses as Fed rate-hike bets weigh
ASIAN currencies dipped in holiday-thinned trade on Friday, and were on course for weekly losses, as the increased probability of an interest rate hike by the U.S. Federal Reserve at its next meeting continued to weigh on sentiment.
The South Korean won, Asia’s worst performing currency so far this year, has declined 2.2% this week, heading for its biggest weekly drop since mid-February.
Thailand’s baht and Singapore’s dollar also dipped on Friday and were poised for weekly losses.
The yuan slipped 0.2%. Asian markets have largely been subdued this week, with a lack of significant triggers keeping trading confined to narrow ranges.
“In the ASEAN at least, liquidity is low as many markets are closed for the Ramadan period,” said Jeff Ng, a senior currency analyst at MUFG Bank.
Rising expectations that the Fed will raise interest rates by 25 basis points in May have lent some support to the greenback, which was last trading up 0.09% at 101.87. Money markets are now pricing in a nearly 86% chance the Fed will hike rates by 25 basis points next month, compared to a 69% chance last week. This likelihood of an interest rate hike in May was further reinforced by Fed speakers overnight.
“FX markets have been largely trading range-bound in absence of fresh catalyst as markets continue to weigh growth risks and tightening path,” OCBC strategists wrote in a note.
Investors are assessing the path for interest rates, and many expect a slowing U.S. economy could lead the Fed to start cutting rates later this year as the central bank juggles its fight against inflation.
Data showed the number of Americans filing new claims for unemployment benefits increased moderately last week, suggesting the labour market was gradually slowing. Back in Asia, shares in Seoul fell 0.8% on Friday and were set for their first weekly loss in six.
The country’s exports for the first 20 days of April fell 11.0%, dragged down by China-bound shipments.
Equities in Taipei and Singapore also declined. Markets in Indonesia and Malaysia were closed for the day. China’s blue-chip CSI 300 Index and the Shanghai Composite Index both fell 1.3% and were on track for their biggest single-day drop in five weeks.
Meanwhile, Chile’s President Gabriel Boric said he would nationalise the country’s lithium industry, the world’s second largest producer of the metal.
HIGHLIGHTS
** Bank of Korea’s new member says policy appropriate for domestic situation needed
** Biden to meet Philippine President at White House on May 1 ** Japan’s ‘core-core’ CPI up 3.8% y/y, hits highest since December 1981
** South Korea economy likely narrowly avoided recession in Q1 – Reuters Poll – Reuters