Asian currencies experienced a decline on Wednesday, driven by a strengthening US dollar following hotter-than-expected inflation data. Meanwhile, artificial intelligence-related stocks in South Korea and Taiwan continued their upward momentum, extending a recovery from the previous week’s selloff.
The US dollar continued its ascent in Asian markets, nearing a two-week high. This surge was fueled by the inflation figures and hawkish comments from Federal Reserve officials, which increased speculation about a potential interest rate increase in the coming month.
The inflation reading aligned with a rate of progress that Federal Reserve Governor Christopher Waller has previously indicated would warrant a 50-basis-point interest rate hike.
Further reinforcing the prospect of additional monetary tightening, voting members of the Federal Reserve’s rate-setting committee expressed ongoing concerns about persistent elevated inflation.
The benchmark two-year Treasury yield, highly sensitive to interest-rate expectations, rose overnight to its peak since October 28. This upward movement in US yields typically puts pressure on Asian currencies and equities as investors reconsider the attractiveness of emerging-market assets.
“Looking beyond immediate data risks, we maintain a preference for a selective recovery in Asian currencies over the medium term, especially if pressure from US rates subsides and declining oil prices offer relief to net oil importers,” commented Christopher Wong, FX strategist at OCBC.
The Thai baht depreciated by 0.5%, and the Malaysian ringgit weakened to 4.075 per US dollar, reaching its lowest point in a week. In contrast, the South Korean won strengthened by 0.6% to 1,334.16 per dollar, defying the broader downtrend, aided by renewed optimism in the chipmaking sector.
Technology-focused stock markets in South Korea and Taiwan continued their gains, closing up 2.6% and 3.6% respectively. This followed a rebound from a recent AI-driven selloff, bolstered by strong earnings from CoreWeave, which reassured investors regarding demand for AI infrastructure.
Indonesian stocks fell by 0.2% ahead of MSCI’s November index review scheduled for later in the day. The rupiah weakened to 18,175 per dollar, approaching its all-time low of 18,190 reached in June. Investor caution persisted following MSCI’s warning that the country could potentially lose its emerging-market classification.
In response to concerns raised by MSCI, the Indonesia Stock Exchange has recently eliminated a 5 trillion rupiah ($275.5 million) market-cap threshold from its screening process for companies violating high shareholding concentration rules. This move aims to enhance market transparency.
Thailand’s benchmark index rose by 0.4%, and Singapore’s market climbed 1.1%. Conversely, Malaysian equities defied the broader trend, falling by 0.6%.