Wednesday, May 18

Asian FX, stocks tumble on investor unease over future rate hikes

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Emerging Asian stocks and currencies fell

sharply on Friday, reversing gains from the previous day, as

investors fear rising interest rates could hurt global economic

growth, while firmer US dollar and Treasury yields also

fueled risk aversion.

The South Korean won and the Taiwan dollar

fell over 0.6% each to lead losses among regional

currencies, followed by a 0.6% fall in the ringgit which

hit its lowest level in over two years.

“Reality has sunk in that the Fed is embarking on a very

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aggressive tightening cycle, despite announcing a temporary

slowdown, and there is no guarantee that such a move could bring

inflation under control soon enough,” said Khoon Goh, Head of

Asia research at ANZ Banking Group (Singapore).

The Bank of England (BOE) on Thursday hiked interest rates

by 25 basis points (bps) while flagging a risk of recession and

a double-digit inflation growth in Britain, spooking markets

that witnessed a short-lived rally on the back of the US

Federal Reserve’s rate hike announcement.

Southeast Asian central banks have sought to balance raising

interest rates off historic lows to tackle inflation while

supporting economic growth as the region emerges from a

pandemic-driven downturn.

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Equities in the region were in a sea of ​​red. Singapore’s

benchmark index fell 1.4% and was headed for its worst

day in over two months, while stocks in Thailand slipped

1.1% to hit a near one-month low. Malaysia and

Philippines stocks also fell.

Goh said that regional markets also came under pressure

following the rise in US Treasury yield which breached the 3%

mark after data showed that labor market conditions in the US

continued to tighten.

This led yield on the Singapore 10-year benchmark treasury

paper to climb 2.730% to its highest in over six


The Malaysian 10-year benchmark yield also rose

to a more than five-year high of 4.466%.

The COVID-19 situation in China also fueled the risk-off

sentiment as the country doubles down on its “zero-COVID”

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strategy, stoking worries of a further economic downturn.

“The (Chinese) economy was barely mentioned in the politburo

meeting on Thursday, suggesting that the government will clearly

keep, if not strengthen, its dynamic zero-COVID strategy (ZCS)

for some time,” Nomura analysts said in a note.

Meanwhile, oil prices continued their ascent on supply

concerns ahead of an imminent European Union embargo on Russian



** Indian Rupee falls 0.6%, on track for its

sharpest fall in one month

** Tokyo consumer prices rise at their fastest pace in 7


** The Philippines posts a $5 billion trade deficit in

March, its biggest so far this year

Asia stock indexes and currencies

at 0424 GMT




Japan -0.31 -11.8 <.n2>

China EC>

India -0.58 -3.09 <.ns ei>

Malaysia -0.59 -4.78 <.kl se>

Philippi -0.12 -2.83 <.ps nes i>

S.Korea 11>

Singapore -0.12 -2.63 <.st e i>

Taiwan -0.66 -6.78 <.tw ii>

Thailand -0.07 -2.82 <.se ti>

(Reporting by Tejaswi Marthi in Bengaluru;

Editing by Vinay Dwivedi)



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