*
Ringgit hits lowest level in over 3 months
*
Rupiah touches 8-week low
*
Peso, baht hit over 1-week low
*
Philippine shares top laggard
By Roushni Nair March 8 (Reuters) - The Malaysian ringgit and South Korean won led losses among Asian currencies on Wednesday after U.S. Federal Reserve Chair Jerome Powell struck an unexpectedly hawkish tone overnight, edging equities across the region into the red.
The ringgit weakened 1.11% to its lowest level since late November, while the South Korean won depreciated as much as 1.88%, marking its worst day in over four weeks. The Indonesian rupiah , the best-performing currency among its peers so far this year, and the Philippine peso followed suit to retreat 0.6% each, while the Indian rupee and Thailand's baht weakened 0.2% and 0.1%, respectively. In a testimony to the Congress overnight, Powell flagged that a string of stronger-than-expected economic data indicated that "the ultimate level of interest rates is likely to be higher than previously anticipated." The remarks also sent short-term rate expectations higher, with traders now betting on an almost 70% chance of a 50 basis point rate hike in March, according to CME's FedWatch tool, up from about 30% a day earlier. "The market's repricing of the higher peak of US Fed Funds Target Rate and shallower Fed rate cuts in the second half has led to a snap back in the USD and a strong rebound in short-term US Treasury yields, leaving Major FX and Asian FX space to turn out to be more ferocious than we had anticipated," analysts at OCBC said in a note.
Central banks globally will now look to tighten monetary
policy further to rein in sticky inflation, which in turn will
spur volatility in Asian emerging markets, Jeff Ng, a senior
currency analyst at MUFG, said highlighting the implications of
Powell's stance.
Investors will keep a close watch on the U.S. jobs report for
February, due on Friday, for clues on the size of the Fed's
future interest rate hikes.
Asian currencies were further challenged by the greenback
gaining strength suddenly. The U.S. dollar index , which
measures the U.S. currency against a basket of six major units,
jumped 1.3% overnight to a three-month peak at 105.65.
In Malaysia, the central bank is expected to hold its policy
interest rate unchanged at 2.75% on Thursday, according to data
from economists polled by Reuters, even as inflation in the
country still remains above its target range of 2-3%.
"Currently, I anticipate that the dollar strength will come
and go over the next one or two quarters until maybe the middle
of the year when the Fed will start to look towards keeping
rates high but perhaps not hiking further once it reaches a
certain level," MUFG's Ng said.
Equities across the region tumbled as Powell's remarks kept
risk appetite in check. Equities in Manila gave up as
much as 1.3% eyeing its worst day in over a week. Singapore's
benchmark index and South Korean stocks lost 0.5%
and 1.3%, respectively
Separately, Thailand's finance minister said the country's
inflation could fall further and return to the central bank's
target range of 1-3% this year.
HIGHLIGHTS:
** India bond yields jump as bets of larger Fed rate hike
rise
** Malaysia's 2023 biodiesel exports to fall to six-year low
Asia stock indexes and currencies
at 0651 GMT
COUNTRY FX RIC FX FX INDE STOCKS STOCKS
DAILY % YTD % X DAILY YTD %
%
Japan -0.41 -4.79 <.N2 0.48 10.61
25>
China <CNY=CFXS +0.08 -0.97 <.SS -0.22 6.10
> EC>
India -0.21 +0.78 <.NS -0.29 -2.46
EI>
Indonesi -0.65 +0.78 <.JK -0.38 -1.60
a SE>
Malaysia -1.11 -2.65 <.KL -0.40 -2.85
SE>
Philippi -0.52 +0.60 <.PS -0.80 1.29
nes I>
S.Korea <KRW=KFTC -1.66 -4.31 <.KS -1.28 8.74
> 11>
Singapor -0.06 -1.11 <.ST -0.49 -0.67
e I>
Taiwan -0.61 -0.24 <.TW -0.25 11.89
II>
Thailand +0.00 -1.40 <.SE -0.51 -3.50
TI>
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic: World FX rates Asian stock markets ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Roushni Nair in Bengaluru; Editing by Dhanya Ann
Thoppil)
