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EM ASIA FX-Fears of Fed rate hike, ECB tapering rattle Asia FX, bonds
October 5, 2016 / 3:37 AM / a year ago

EM ASIA FX-Fears of Fed rate hike, ECB tapering rattle Asia FX, bonds

* Won hits 2-week low; foreigners sell Korea bonds, stocks
    * Philippine peso hovers around 7-year low
    * Ringgit, baht fall as Malaysia, Thai bond prices slide

 (Adds text, updates prices)
    By Jongwoo Cheon
    SINGAPORE, Oct 5 (Reuters) - Most emerging Asian currencies
and bonds fell on Wednesday, hurt by a top U.S. Federal Reserve
official's support for an interest rate hike and concerns over a
potential reduction in stimulus by the European Central Bank.
    South Korea's won also hit a two-week low as
foreign investors sold local stocks and bonds 
after higher-than-expected inflation data, which is likely to
discourage the central bank from easing interest rates further
anytime soon. 
    The Philippine peso hovered near a seven-year low
on concerns that the economy may slow down while inflation
    Malaysia's ringgit and Thailand's baht 
slumped as most bonds prices  of those
countries slid.
    Richmond Federal Reserve President Jeffrey Lacker said on
Tuesday there was a strong case for raising interest rates,
arguing that borrowing costs might need to rise significantly to
keep inflation under control. 
    Bloomberg reported the ECB would probably wind down its
80-billion-euro ($90 billion) monthly bond purchases gradually
before ending its quantitative easing programme, citing
unindentified officials at euro zone countries' central banks.
    The ECB's decision-making body has not discussed reducing
the pace of its monthly bond buying, ECB media officer Michael
Steen later tweeted. 
    U.S. Treasury yields jumped to near two-week highs after the
    Such tapering could undermine investors' appetite for
higher-returns in emerging Asia, which has been supporting
regional currencies and bonds.
    "A loss of confidence in the persistent availability of
cheap liquidity will introduce an additional risk premium not
only into yield curves but across asset classes funded by such
cheap liquidity," Citi Research wrote in a note.
    "In EM Asia, we judge the markets most at risk from a
positioning & correlation shock to be Indonesian bonds and
Korean and Thai rates, and IDR, TWD and KRW on the currency
    The won opened down 0.8 percent at 1,117.0 per dollar, its
weakest since Sept. 21.
    South Korea's annual inflation in September accelerated to
its highest in seven months on recovering consumption. While the
1.2 percent rise in consumer prices was modest, it exceeded
estimates and dampened hopes of a rate cut, which many analysts
had been expecting soon.
    The won recovered much of its earlier losses on the dollar's
retreat in Asia and exporters' demand for settlements.
    The unit is seen having a chart support at 1,118.6, the 76.4
percent Fibonacci retracement of its appreciation in late
September, analysts said.
    The peso fell 0.3 percent to 48.38 per dollar. That compared
with 48.50 hit on Sept. 30, the weakest since September 2009.
    Consumer inflation in the Philippines accelerated to an
18-month high in September, but the central bank said there was
no need to change its monetary policy stance.
    The Philippine currency pared earlier losses as foreign
investors bought Manila stocks, but investors stayed
bearish on a row between President Rodrigo Duterte and
traditional ally the United States over his war on drugs.
    "Although domestic policymakers have argued that currency
swings are centred on Fed rate uncertainty, the recent weakness
in the peso is above and beyond that seen elsewhere in the
region," said Dwyfor Evans, managing director, head of APAC
macro strategy at State Street Global Markets in Hong Kong.
    "It all points to heightened domestic political risk."
    The Philippine central bank Deputy Governor Diwa Guinigundo
last week said uncertainty U.S. monetary policy caused portfolio

    Change on the day at 0300 GMT
  Currency                Latest bid   Previous day  Pct Move
  Japan yen                   102.88         102.90     +0.02
  Sing dlr                    1.3709         1.3702     -0.05
  Taiwan dlr                  31.385         31.347     -0.12
  Korean won                 1113.30        1107.80     -0.49
  Baht                         34.78          34.68     -0.29
  Peso                        48.360         48.245     -0.24
  Rupiah                       12997          12980     -0.13
  Rupee                        66.46          66.46      0.00
  Ringgit                     4.1400         4.1250     -0.36
 *Yuan                        6.6745         6.6745      0.00
  Change so far in 2016                                      
  Currency                Latest bid  End prev year  Pct Move
  Japan yen                   102.88         120.30    +16.93
  Sing dlr                    1.3709         1.4177     +3.41
  Taiwan dlr                  31.385         33.066     +5.36
  Korean won                 1113.30        1172.50     +5.32
  Baht                         34.78          36.00     +3.51
  Peso                         48.36          47.06     -2.69
  Rupiah                       12997          13785     +6.06
  Rupee                        66.46          66.15     -0.47
  Ringgit                     4.1400         4.2935     +3.71
  Yuan                        6.6745         6.4936     -2.71
  * Chinese financial markets are closed for holidays this week.

 (Reporting by Jongwoo Cheon; Editing by Kim Coghill)

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