Wednesday, July 6

Asian FX dips on rate hike prospects, oil rally sparks inflation fears

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Asian currencies and stocks slide on

Thursday as interest rate hike prospects in the United States

and Europe dented global investor sentiment, while a rally in

oil prices further rekindled inflation fears.

The European Central Bank will meet later on Thursday and

markets expect it to put an end to bond buying program this

month while its US counterpart is widely expected to hike

interest rates by 50 basis points next week.

Among currencies, the Indonesian rupiah is a top

drags, shedding 0.4%, followed by the baht, which lost

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0.1%. The Singaporean dollar and the ringgit also

edged lower.

“The Fed will remain open to raising rates by 50 basis

points even in September, with post-summer policy moves

contingent on inflation and labor market data,” analysts at

Australia and New Zealand Banking Group said in a note.

The Bank of Japan remains one of the few global central

banks to maintain a dovish stance while others have adopted

tightening policies of hiking interest rates to combat


Central banks in Asia also have started to raise interest

rates to curb red-hot inflation. India’s central bank was latest

to hike interest rates by 50 basis points on Wednesday while the

Bank of Thailand (BOT), stood on pat on interest rates but

opened the possibility for imminent rate hikes.

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“We think that the BOT’s policy normalization in the second

half of the year is highly likely. A 25-bps policy rate hike

could come possibly as soon as in the next meeting in August

given inflation concerns,” DBS analysts wrote in a note.

Stocks in the region also took a beating after the Wall

Street suffered losses overnight. The Philippines’ benchmark

index fell 0.8% to mark its biggest drop in a week,

followed by a 0.7% drop in Malaysian and Indonesian


Global markets are also turning their focus to the US

consumer price report on Friday. Forecasts are for a steep 0.7%

rise in May, though the annual pace is seen holding at 8.3%

while core inflation is seen slowing a little to 5.9%.

Meanwhile, oil extended gains underpinned by robust demand

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from top consumer US while prospects of demand recovery in

China also aided the sentiment. The rise in oil prices comes

despite the OPEC+’s decision to raise output in order to meet

global demand.

Efforts by OPEC+ oil producers to boost output are “not

encouraging,” UAE energy minister Suhail al-Mazrouei said on

Wednesday, noting the group was currently 2.6 million bpd short

of its target.


** Indonesian 10-year benchmark yields rise for a fourth day

to 7.244%

** The OECD joined the World Bank in slashing growth outlook

in 2022, but said it sees limited stagflation risk

** Shanghai’s Minhang district announces new lockdown

measures to control COVID-19 transmission risks

Asia stock indexes and currencies

at 0352 GMT




Japan +0.26 -14.0 <.n2>

China EC>

India -0.03 -4.40 <.ns ei>

Indonesi -0.45 -2.10 <.jk a se>

Malaysia +0.05 -5.15 <.kl se>

Philippi +0.09 -3.68 <.ps nes i>

S.Korea 11>

Singapore +0.05 -1.91 <.st e i>

Taiwan -0.07 -6.26 <.tw ii>

Thailand +0.04 -3.18 <.se ti>

(Reporting by Tejaswi Marthi in Bengaluru; Editing by Sam




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