The Indian rupee weakened half a percent
on Thursday ahead of a widely expected rate increase on Friday,
while most other Asian currencies struggled for direction as the
dollar stayed strong and Federal Reserve officials indicated
more rate hikes to come.
Equities in the region were mixed, with markets in Malaysia
Thailand, and South Korea advancing as
much as 0.7%, while benchmarks in the Philippines, Taiwan
and Indonesia slipped up to 0.5%.
The rupee hit a one-week low on widening trade
deficit and global flows into the safe-haven dollar, while bond
yields ticked lower on falling global oil prices.
The currency, which has weakened more than 6% so far this
year, is expected to trade near its record low in the coming
quarter, a Reuters poll showed. However, the widely expected
rate-hike decision from the Reserve Bank of India (RBI) on
Friday is seen providing some stability to the wobbly currency.
Analysts are divided over the size of the expected hike,
with views widely split between 25 basis points and 50 basis
points, according to a Reuters poll of economists. Analysts at
Barclays, Citi, and DBS expect a 35-bp hike.
In Thailand, the baht appreciated 0.2% as investors
awaited the central bank to hop on the global policy tightening
bandwagon in a meeting next week, with analysts at DBS Group
saying a 25-bp hike had been fully priced by the market.
“We think there is a non-negligible risk that the Bank of
Thailand might be debating bigger moves, especially given the
context of multi-year high inflation and hawkish surprises by
Asian central banks,” they added.
Other currencies were struggling for headway as the US
dollar index appreciated slightly. The greenback has
gained 0.5% so far this week as investors priced in potential
future rate hikes.
Treasury yields slipped, with those on the 10-year note
at 2.7318% on strong factory orders data. Market
participants now await non-farm payrolls data, due on Friday,
which could determine the Fed’s tightening path.
Meanwhile, the Bank of England is expected to raise interest
rates by the most since 1995 later in the day, a Reuters poll
showed, attempting to stop a surge in inflation even at the risk
Regional bond yields were flat-to-low, with returns on
high-yield notes: India and Indonesia at
7.220% and 7.219%, respectively.
**US 2-year yields edge lower to 3.0999%
** Foreigners turn sellers of Chinese shares in July on
** FX markets haven’t seen last of dollar strength yet –
analysts – Reuters poll
at 0627 GMT
COUNTRY FX FX FX INDEX STOCKS STOCKS
RIC DAILY % YTD % DAILY % YTD %
Japan -0.28 -14.27 0.7 -2.99
China +0.09 -5.90 0.54 -12.61
India -0.44 -6.52 -0.75 -0.55
Indonesia -0.15 -4.57 0.29 7.38
Malaysia +0.07 -6.47 0.55 -2.52
Philippines -0.04 -8.49 0.30 -9.45
S.Korea -0.08 -9.36 0.54 -16.89
Singapore +0.03 -2.25 0.35 4.47
Taiwan -0.07 -7.78 -0.51 -19.30
Thailand +0.21 -7.61 0.30 -3.50
(Reporting by Sameer Manekar in Bengaluru; Editing by