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
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
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
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
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%.
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
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.
** Singapore Q2 GDP rises 4.8% y/y, missing forecasts
** Stocks in Malaysia, Indonesia and Taiwan
up between 0.2% and 0.5%
** Indian rupee hits record low for fourth
Asia stock indexes and currencies at 0410 GMT
COUNTRY FX RIC FX FX YTD INDEX STOCK STOCKS
DAILY % S YTD %
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