Hike rates

Emerging Markets – Philippine Cenbank set to hike rates 50 basis points at August meeting as Asian currencies fall on recession fears

MANILA, July 11 (Reuters): Most Asian currencies started the week on a subdued note on Monday as concerns over the global economic outlook pushed investors towards the safe-haven dollar, ahead of key data from the United States and from China this week.

The Chinese yuan, Singaporean dollar and South Korean won fell between 0.1% and 0.2%, while the Indian rupee weakened to a new all-time low against the overall strength of the US dollar.

The greenback was perched near a 20-year high as a hawkish US Federal Reserve and the possibility of a global recession persuaded investors to turn to the safety of US bonds.

Stronger-than-expected US labor market data bolstered expectations that the Fed will make another 75 basis point rate hike later this month, a move that could increase pressure on Asian currencies. battered.

“This week the focus returns to inflation, particularly the US CPI (consumer price index) and the implications of the Fed’s hawkish policy,” said Stephen Innes, managing partner at SPI Asset. Management.

Rising Covid-19 cases in China are adding to concerns in the region. Several cities are imposing new restrictions, ranging from business suspensions to closures, to stifle new clusters.

Shanghai, the country’s economic hub, is preparing for another mass testing campaign after detecting the BA.5 Omicron subvariant.

The reintroduction of strict foreclosure measures in China could trigger selling pressure on Asian emerging market assets, said Poon Panichpibool, market strategist at Krung Thai Bank.

Chinese stocks fell 1.8% to their lowest level since June 23.

Shares in Taiwan and the Philippines fell 0.9% and 0.7%, respectively. Market participants are unlikely to place big bets on the yuan ahead of a series of key data releases this week, including China’s second-quarter GDP figures.

High commodity prices and narrowing interest rate differentials weighed heavily on most Asian currencies. The Philippine peso and Thai baht have fallen 9.7% and 7.6% respectively this year.

The governor of the central bank of the Philippines said he was ready to raise its key rates by 50 basis points at its August meeting and to follow up with new policy measures to control inflation and counter the depreciation of the currency.

Thailand’s central bank said on Friday it would let the baht move with market forces, but would manage any excessive volatility in the currency. On Monday, the peso was down 0.2%, while the baht traded flat.

The Sri Lankan rupee fell 0.3% as President Gotabaya Rajapaksa informed Prime Minister Ranil Wickremesinghe that he would step down, after tens of thousands of protesters stormed the official residences of the two men.

The Singapore Stock Exchange and the Malaysian Stock and Currency Markets were closed on Monday due to the Hari Raya Aidil Adha holiday. -Reuter