Philippine peso trades higher after rate hike, other Asian FX slip

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The Philippine peso gained marginally on Thursday after

the central bank raised its interest rate by a widely expected half-point in its

battle to combat inflation, while most other Asian currencies were subdued on

broad dollar strength.

The peso strengthened up to 0.3% after the Bangko Sentral ng

Pilipinas (BSP) hiked its benchmark rate by 50 basis points, its fourth increase

this year.

The hike comes as the economy faces a double whammy of slowing economic

growth and soaring inflation, with the peso’s sharp drop in June and July, down

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more than 5%, also raising chances of a bigger rate increase.

Amid broadening price pressures, ING senior economist Nicholas Mapa said,

“BSP can carry out 25-bp rate increases at each of the remaining policy meetings

for the balance of the year.”

The peso is among the worst performing currencies in the region,

depreciating more than 8% so far this year on the dollar’s strength as the Fed

continues with its aggressive policy tightening.

“We expect a depreciation bias for the peso in the near-term as the import

season kicks into high gear,” Mapa said.

Meanwhile, most other Asian currencies were pressured by a stronger dollar

on Thursday after U.S. Federal Reserve minutes indicated the central bank was

committed to raising rates as high as necessary to tame inflation.

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The dollar index, which measures the greenback against a basket of

six major currencies, was trading higher at 106.86, rising more than 1% so far

in the week on certainty that interest rates would remain higher to contain

runaway inflation.

IG Group market strategist Yeap Jun Rong said the minutes acknowledged the

risks to economic activity from too much tightening, “which suggests a more

measured tightening approach could be taken with some eyes on growth

conditions.”

The South Korean won weakened as much as 0.8%, its lowest since

July 18, while the Indonesian rupiah slipped 0.5% to touch its weakest in

a week.

The Thai baht fell 0.7% to its lowest in more than a weak, while

the Indian rupee, China’s yuan, and the Singapore dollar

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were down about 0.3% each.

Indonesian shares advanced 0.5%, while Singapore added 0.3%.

Philippine stocks closed marginally higher before the policy decision,

while most other markets were largely unchanged.

HIGHLIGHTS:

** Indonesian 10-year benchmark yields fall marginally to 7.052%

** Thailand to see faster GDP growth in Q3 as investment, tourism return –

finmin

** Philippines plans first retail bond issue under Marcos administration

** Sri Lanka c.bank holds rates steady; expects inflation to ease

Asia stock

indexes and

currencies

at 0741 GMT

COUNTRY FX FX FX INDEX STOCKS STOCKS

RIC DAILY % YTD % DAILY YTD %

%

Japan -0.24 -14.97 z0.96 0.52

China -0.20 -6.46 -0.46 -9.95

India -0.26 -6.69 -0.31 3.08

Indonesia -0.51 -3.98 0.58 9.02

Malaysia -0.13 -6.89 -0.08 -1.34

Philippines +0.18 -8.72 0.08 -4.18

S.Korea -0.79 -10.00 -0.33 -15.77

Singapore -0.21 -2.51 0.32 4.79

Taiwan -0.10 -7.78 -0.44 -15.49

Thailand -0.69 -6.46 -0.34 -1.41

(Reporting by Sameer Manekar in Bengaluru; Additional reporting by Upasana

Singh; Editing by Subhranshu Sahu)