Thailand’s baht extended losses on
Wednesday after the country’s central bank hiked interest rates
by 25 basis points (bps) in a widely anticipated move, while
other currencies in the region also weakened against the US
The Bank of Thailand (BOT), which has lagged its regional
peers in the scale of monetary tightening, raised its key rate
for a second straight meeting, in a bid to tame inflation and
ensure a continued economic recovery.
The baht shed 0.9%, while equities in Bangkok
dropped 0.5% after the decision. The baht, which has
lost about 12.8% so far this year, lingered at its lowest level
in more than 16 years.
The central bank’s decision was in line with a Reuters poll
of economists. About 22 of the 25 those surveyed had predicted
the BOT would raise rates by 25 bps, while three had projected a
bigger 50 bps hike.
“We were looking for something a bit more aggressive. The
fact that they (BOT) only went 25 (bps) has already prompted a
negative reaction in the baht and clearly we’ve seen quite a
sharp weakening since the decision,” said Mitul Kotecha, Head of
EM Strategy at TD Securities.
The rate hike also comes after inflation in the
tourism-reliant economy touched a 14-year high in August, and a
weaker currency exacerbated the price pressures by raising the
cost of imports.
“The risk is certainly there that they (BOT) will need to
hike more aggressively,” Kotecha said.
Meanwhile, the US Federal Reserve’s ever more hawkish
outlook on policy tightening raised global recession fears and
cast a shadow over Asian emerging markets.
Prospects of further rates hikes by central banks worldwide,
a weak sterling due to large unfunded UK tax cut plans, and an
unrelenting rally in the US dollar continued to weigh on
risk-sensitive Asian emerging currencies.
South Korea’s won and the country’s benchmark
index were the lead decliners in the region as they fell
1.3% and 2.5%, respectively.
The Indian rupee and Singapore’s dollar
depreciated 0.4% and 0.5%, respectively. Equities in Mumbai
and Singapore shed 0.1% and 1.4%.
The dollar index, which measures the greenback
against a basket of currencies, gained 0.4% to 114.61, and
earlier hit a new two-decade high of 114.70.
Indonesia’s rupiah weakened 1% to hit a more than
two-year low, even as an official said the country’s central
bank has continued with its “triple intervention” to guard
against excessive falls in the rupiah exchange rate.
Stocks in Jakarta rose 0.3% and were the only bright
spot among the region’s equities.
China’s yuan fell 0.7%, its weakest since January
2008, while equities in Shanghai dropped 1.6%.
** Thai factory output rises 14.52% in August, beats
** India’s RBI likely sells dollars as surging US yields
hold rupee hostage – traders
** S.Korea to buy back 2 trln won treasury bonds – vice fin
The following table shows rates for Asian currencies against
the dollar at 0728 GMT.
COUNTRY FX RIC FX FX INDE STOCKS STOCKS
DAILY % YTD % X DAILY YTD %
Japan +0.08 -20.4 <.n2>
India -0.40 -9.25 <.ns ei>
Indonesi -0.98 -6.68 <.jk a se>
Malaysia -0.32 -9.95 <.kl se>
Philippi +0.14 -13.5 <.ps nes i>
Singapore -0.53 -6.74 <.st e i>
Taiwan -0.34 -13.1 <.tw ii>
Thailand -0.85 -12.7 <.se ti>
(Reporting by Upasana Singh in Bengaluru)