Asian currencies weaken as dollar rises after Fed minutes
January meeting showed policymakers were more confident of the need to keep raising interest rates.BENGALURU, Feb 22 — Asian currencies languished against the dollar today after minutes of the Federal Reserve’s
The Federal Reserve’s rate-setting committee showed more confidence in the economic outlook at its last policy meeting, with most believing that inflation would perk up.
The dollar, which was hit recently by a barrage of bearish factors such as worries about US budget deficit and pursuance of a weaker dollar policy, rebounded this week thanks to rising US Treasury yields.
The 10-year US Treasury yield hit more than four-year highs today and was creeping towards the psychological level of 3 per cent — which analysts say would drive investors away from risky assets such as emerging Asian currencies.
“We do not rule out the possibility that Fed could revise its dots projection slightly upwards for 2019 and for its terminal rate,” said Saktiandi Supaat, head of FX research at Maybank in Singapore, in a report, referring to the Fed’s expectations for its rate path.
“The lead up to next FoMC meeting in Mar could continue to see bouts of USD strength.”
The South Korean won, Thai baht , Indonesian rupiah and the Malaysian ringgit — all shed about half a per cent or more on the day, hurt by narrowing gap between the local bond yields and US Treasury yields.
Minutes from the last policy meeting of India’s central bank didn’t help the rupee as they showed increasing concern among members about accelerating inflation, undermining the rupee and local bonds.
China’s yuan eased against the US dollar today, the first trading day after long Lunar New Year holiday, following a much weakened official guidance rate and strength in the greenback. On the other hand, the Japanese yen gained as speculation of a faster pace of US rate hikes soured investors’ risk appetites and dented equities. Investors’ growing aversion to riskier regional assets was evident in rising foreign outflows.
Exchange data from seven Asian exchanges including India, Indonesia and South Korea showed foreigners have sold US$8.2 billion (RM32.1 billion) in equities so far this month, after buying over US$7 billion in January.
Also a recent poll showed sentiment towards most emerging Asian currencies soured further in the last two weeks. — Reuters
Source: The Malay Mail Online