Central Bank Meetings Across Asia Impact Asian Currency Trading
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Asian currencies experienced subdued trading during a week crowded with Central Bank meetings in the Philippines and Indonesia, along with the Bank of England, Japan, and the US Federal Reserve.
Malaysia’s ringgit, the rupiah in Indonesia, the Taiwan dollar, and the Chinese yuan all saw marginal declines of 0.1%. Meanwhile, Thailand’s baht, Singapore dollar, and Philippine peso were trading flat.
Market analyst at IG, Yeap Jun Rong, noted that market sentiment was entering a period of relative calm leading up to a series of critical central bank live decisions this week, describing it as the “calm before the storm.”
The consensus anticipates that the Federal Reserve will maintain its current interest rates while adopting a hawkish stance. Similarly, the Bangko Sentral ng Pilipinas (BSP) and Bank Indonesia (BI) are expected to maintain a stable rate in their upcoming policy meetings.
The Bank OF England Sets To Raise Interest Rates
Moreover, analysts at Barclays noted that the recent increase in inflation, particularly in the Philippines, suggests that the central bank will likely be compelled to uphold its hawkish rhetoric and resist the anticipation of policy easing.
Meanwhile, there exists considerable uncertainty regarding the Bank of Japan’s policy decision after recent remarks by Governor Kazuo Ueda. This decision fueled speculation of an impending shift from its ultra-loose monetary policies. This led to a 0.1% increase in the yen, which has already experienced an 11% decline this year.
Looking ahead to Thursday, it is anticipated that the Bank of England will raise interest rates for the 15th time, bringing benchmark borrowing costs to 5.5%.
The chief market analyst at KCM Trade, Tim Waterer, highlighted that any changes in expectations regarding interest rates over the coming week will heavily influence risk appetite.
Furthermore, a prolonged surge in oil prices, reaching a 10-month high, has stoked inflationary pressures and reduced the appeal of Asian currencies for countries like Thailand and South Korea.
Stocks Across Asia Experienced Decline
In separate findings, data has revealed that Singapore’s non-oil domestic exports declined for the 11th straight month in August. This decline reflects the challenges the trade-reliant economy faces amidst global economic headwinds related to declining and inflation demand.
Stocks across emerging Asia experienced a broad decline, with Taipei’s equities leading the losses by 1.2%. Meanwhile, shares in Indonesia, South Korea, and Thailand saw drops ranging from 0.4% to 0.9%. Japan’s equity market remained closed due to a public holiday.
Additionally, Asian currencies remained subdued amid a flurry of central bank meetings, with marginal declines seen in some. The Federal Reserve is expected to maintain a hawkish stance, while inflation pressures may guide the Philippines’ central bank.