Asian currencies pressured by rising U.S. rate path

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The South Korean won and Thailand’s baht were the top

losers on Friday, as Asian emerging currencies were pressured by the Federal

Reserve’s resolve to further raise rates to contain inflation that buoyed the

dollar.

China’s yuan, one of the most traded currencies in the region,

fell as much as 0.4% to a more than three-month low, while the Thai baht

weakened half a percent to hover near a 10-day low.

The U.S. dollar index, which measures the greenback against a basket

of major peers, was up at 107.63 in early Asia trading hours, and was on track

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to end the week about 2% stronger lifted by the Fed’s continued tightening

stance.

The South Korean won slumped to an over 13-year low, falling 0.6%

and marking its fourth straight session of losses, while the Indonesian rupiah

slipped 0.3% to its lowest level in nine days.

Bank Indonesia (BI), one of the few laggards in the region yet to begin its

monetary policy tightening, is expected to stand pat on its benchmark rate yet

again in a meeting next week considering the rupiah’s recent appreciation and as

inflation remains within target.

Analysts at Barclays and Australia and New Zealand Banking Group (ANZ)

expect BI to hold its policy rate at a record low as the rupiah has recovered in

recent weeks. It has firmed more than 1% since July 21 when it hit a more than

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two-year low.

“The strengthening of the rupiah over the past month and the absence of a

U.S. Fed policy meeting in August both reduce the impetus for BI to act in the

very near term, in our view,” ANZ analysts said in a note.

However, a rate hike is expected at BI’s September meeting.

With second-quarter economic growth accelerating, data suggesting economic

activity remains robust and upside risks to inflation rising, BI’s rate lift-off

is expected to begin in September, the ANZ analysts added.

Meanwhile, more policy easing is expected in China, with ANZ and Barclays

analysts expecting a 10 basis point cut in the loan prime rate (LPR) next week.

A Reuters survey predicts a 10 bp cut to the mortgage reference. The loan

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prime rate (LPR), which banks normally charge their best clients, is set by 18

designated commercial banks who submit proposed rates to the People’s Bank of

China (PBOC).

Among other regional currencies, the Malaysian ringgit, Philippine

peso and Indian rupee were largely unchanged, while Japan’s yen

declined 0.3% as inflation accelerated at its fastest pace in over seven

years.

Equities were largely mixed, with shares in Singapore down as much as

0.8%, while those in Thailand and South Korea were down about

0.2%, respectively. Philippine shares advanced 0.5%, a day after the

central bank hiked its benchmark rate by 50 basis points.

HIGHLIGHTS:

** Indonesian 10-year benchmark yields tick higher to 7.087%

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** China set to lower lending benchmarks to revive wobbly economy

** India hikes taxes on fuel exports, slashes windfall tax on local crude

Asia stock indexes

and currencies

at 0358 GMT

COUNTRY FX FX FX INDEX STOCKS STOCKS

RIC DAILY % YTD % DAILY % YTD %

Japan -0.30 -15.56 0.085 0.61

China -0.33 -6.68 -0.01 -9.96

India -0.09 -6.79 0.06 3.53

Indonesia -0.20 -4.10 0.14 9.35

Malaysia -0.08 -6.96 -0.03 -1.39

Philippines +0.05 -8.83 0.44 -3.77

S.Korea -0.47 -10.43 -0.27 -16.00

Singapore -0.04 -2.71 -0.74 4.02

Taiwan -0.14 -7.85 0.32 -15.22

Thailand -0.43 -6.61 -0.07 -1.37

(Reporting by Sameer Manekar in Bengaluru; Editing by Jacqueline Wong)