Dollar Hits Seven-Week High as Fed Hike Weighs on Asian Currencies
The US dollar reached a seven-week high following the Federal Reserve's first rate increase in over three years. Emerging Asian currencies suffered their sixth consecutive session of losses as a result.
The US dollar index climbed to its highest level in seven weeks on Thursday. This move followed the Federal Reserve's decision to raise interest rates, marking the first hike in more than three years.
Emerging Asian currencies declined across the board. The MSCI gauge for emerging markets currencies fell by 0.2%, extending its losing streak to a sixth consecutive session.
Regional currencies hit recent lows
The Malaysian ringgit weakened by as much as 0.4% to 4.098 per dollar. This marked its lowest level since June 26. The Indonesian rupiah dropped 0.5% to 17,765 against the US dollar.
The South Korean won fell to a three-week low of 1,384.40 per dollar. Traders are repricing the interest rate differential, making weaker currency the path of least resistance for emerging Asia, according to Inki Cho of Exness.
Equities show mixed regional performance
The MSCI EM Asia equities index remained 0.1% higher despite trimming earlier gains. The South Korean Kospi index erased nearly 1.2% of its earlier gains to end flat. Taiwan's main stock index closed nearly 1% higher.
Chip-heavy indexes benefited from artificial intelligence trends, remaining unperturbed by rising rates. However, Malaysian stocks declined by 0.3%, contrasting with broader regional stability.
AirAsia shares drop sharply
AirAsia Group Bhd shares tumbled as much as 21.1% to their lowest level since December 28, 2022. The decline followed reports that the Malaysian government is in talks with rivals to absorb the carrier's market share.
Market attention now turns to the Bank of Japan. The central bank is expected to raise interest rates to a 31-year high on Friday. Signals of continued borrowing cost increases are anticipated, according to analysis from GN markets/fx (en-US).
