Singapore dollar, Philippine peso climb as c.bank moves surprise

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Currencies in Singapore and the

Philippines both bucked the regional trend to strengthen on

Thursday, as broad inflationary pressures prompted their

respective central banks to tighten monetary policy in surprise

moves.

The Singaporean dollar gained as much as 0.7% to

notch its biggest intraday gain in nearly two months, while the

peso jumped 0.3%.

The Monetary Authority of Singapore (MAS) said the off-cycle

move will help slow the momentum of inflation and ensure

medium-term price stability. The central bank added that core

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inflation for the year is now projected between 3.0–4.0%, up

from an earlier forecast of 2.5–3.5%.

“With forecasts pointing to even higher inflation prints

down the road, we consider it likely that we will see further

action by the MAS at the October meeting,” said Nicholas Mapa,

an economist at ING.

Markets were also taken by surprise when the Philippine

central bank announced an impromptu 75 basis points hike in its

benchmark rate.

Bangko Sentral ng Pilipinas’ hike came ahead of a regular

policy meeting scheduled for next month, and follows two

back-to-back rate raises of 25 basis points each in May and

June. Stocks in Manila declined 1.3%.

“The fact is that moves from Asian central banks are in

response to upside inflation risks, but the timing and size of

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the moves are also aimed at ensuring their currencies don’t

continue to weaken too fast,” said Khoon Goh, head of Asia

research at ANZ.

Asian currencies have come under immense stress in recent

months, with expectations that the Fed will hike rates faster

and further than its peers, contributing significantly to the

safe haven dollar’s unrelenting surge.

Overnight U.S. data showed the consumer price index surged

9.1% last month.

The dollar rallied and risk-off sentiment reigned after

searing hot U.S. inflation stoked worries that the Fed could

raise rates by an enormous 100 basis points at its meeting next

month rather than the 75 bp that had been expected.

Thailand’s baht, the Malaysian ringgit and

South Korea’s won fell between 0.1% and 0.3%.

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Bank of Thailand (BoT) and Bank Indonesia (BI) are the only

two major central banks in the region yet to start normalizing

their super-loose policies sparked by the coronavirus pandemic.

Goh said recent actions taken by other regional central

banks will raise pressure on BoT and BI to kick-start

normalization and contemplate bigger than conventional moves.

On Wednesday, the Bank of Korea raised its interest rate by

an unprecedented half point in an effort to tackle 24-year high

inflation.

Meanwhile, sovereign dollar bond issued by Sri Lanka

dipped but still hovered nearly record highs a

day after the country’s prime minister declared a state of

emergency as the acting president.

HIGHLIGHTS

** Singapore Q2 GDP rises 4.8% y/y, missing forecasts

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** Stocks in Malaysia, Indonesia and Taiwan

up between 0.2% and 0.5%

** Indian rupee hits record low for fourth

consecutive session.

Asia stock indexes and currencies at 0410 GMT

COUNTRY FX RIC FX FX YTD INDEX STOCK STOCKS

DAILY % S YTD %

% DAILY

%

Japan -0.45 -16.63 0.71 -7.38

China -0.08 -5.51 0.31 -9.49

India -0.15 -6.80 0.25 -7.76

Indonesia -0.03 -4.94 0.36 1.27

Malaysia -0.11 -6.22 0.19 -9.79

Philippines +0.25 -9.19 -1.38 -13.39

S.Korea -0.12 -9.15 0.06 -21.75

Singapore +0.59 -3.35 -0.82 -0.66

Taiwan -0.05 -7.30 0.54 -20.95

Thailand -0.28 -7.93 -0.20 -6.87

(Reporting by Harish Sridharan in Bengaluru; Editing by Lincoln

Feast)