The Philippine peso was set on Friday for its worst weekly show since June 2013 as markets feared that a modest rate hike by the country’s central bank may not be enough to curb surging inflation, while other Asian currencies strengthened.
The Bangko Sentral ng Pilipinas (BSP) stuck to a 25 basis point increase to its benchmark rate on Thursday for a second month in a row, fearing that more aggressive tightening could compromise growth.
“With inflation expected to have a declining trajectory through into 2023, BSP may continue to gradually hike rates without sacrificing a fully entrenched economic growth recovery,” Ruben Carlo O.
Asuncion, chief economist at the Union Bank of the Philippines, said.
The peso was down for an eighth straight session. It was down 2% during the week, and hovered at a more than 16-1/2-year intraday low notched earlier in the week.
The Thai baht weakened 0.1%, touching a more than five-year low, likely pressured by portfolio outflows, according to Maybank analysts.
Philippine peso hits multi-year lows ahead of central bank meet, Asian stocks fall
Thailand’s central bank had signalled a gradual hike in its benchmark interest rate amid a slow economic recovery and a weakening currency.
Indonesia’s rupiah fell 0.1% during the session, slipping for the third week in row.
Bank Indonesia kept policy rates unchanged at a record low on Thursday, sticking to its dovish stance, despite a depreciating rupiah.
“We now see the September policy meeting as the most likely time that BI will consider hiking the policy rate,” BofA analysts said in a note, and reiterated that the central bank should start normalizing policy in a pre-emptive manner.
Asian markets have seen a meaningful shift in rate hike expectations across the board in the recent months, with Thailand and Indonesia lagging their peers.
Meanwhile, recessionary fears intensified after gauges of factory activity in Japan, Britain, the euro zone and United States all softened in June.
Asian equities gained, led by Seoul benchmark’s 2.2% jump, tracking a solid jump in the Wall Street indexes overnight.
Malaysian shares lost for a fifth straight week, down 1.2%, dragged by lower palm futures, which were on course for their biggest weekly drop since mid-March.
Stocks in the Philippines jumped 2.5% but were still down 1.8% for the week and set for a third weekly loss.