EMERGING MARKETS – Ukraine war jitters hit currencies, yields edge up
Band Sameer Manekar
March 22 (Reuters) – Most Asian currencies extended their sell-off on Tuesday, with the South Korean won and Thai baht leading the slide following a hawkish speech by US Federal Reserve Chairman Jerome Powell and the deepening crisis in Ukraine. .
Powell, in a speech on Monday, pointed to the need to act “quickly” and perhaps “more aggressively” to rein in inflation, which has pushed up dollar and Treasury yields. USD/WE/
The US dollar index =USDwhich measures the greenback against a basket of major currencies, rose slightly to 98.629, while Treasury yields soared, with the benchmark 10-year yield US10YT=RR jumping above 2.3% for the first time since May 2019.
This, coupled with high oil prices in the run-up to an embargo on Russian oil by the European Union, put pressure on Asian currencies. South Korea won KRW=KFTC weakened by 0.6%, while the Thai baht THB=TH slipped 0.5% to its lowest since Jan. 10. WHERE
The baht, the region’s worst performing currency last year and down about 1% so far in 2022, faces headwinds from the country’s exposure to soaring oil prices . Thailand, Southeast Asia’s second largest economy, is the region’s largest net importer of oil.
“Any discernible recovery in the baht could be conditional on oil prices returning to a downward trajectory, which would in turn depend to some extent on further signs of easing in the Russian-Ukrainian conflict,” Maybank analysts said in a statement. note.
Among other currencies, the Malaysian ringgit MYR= depreciated 0.2% to its weakest level since early January, while the Indonesian rupiah RDI= and Singapore dollar CAD= thumb down.
Most regional bond yields edged up, with Singapore five-year bond yields SG5YT=RR touching 2.015%, their highest since May 2019, while benchmark 10-year yields in India IN10YT=RR and Indonesia ID10YT=RR traded at 6.781% and 6.755%, respectively.
While the direct trade and investment impact of the Russian-Ukrainian conflict on Southeast Asian countries is “contained”, the indirect impact of rising oil and commodity prices and the resulting inflation is expected to affect economic growth, said analysts at Singaporean bank DBS.
Meanwhile, the Chinese yuan CNY=CFXS slightly lower at 6.3640 per dollar. China has not denounced Russia’s invasion of Ukraine and Washington fears that Beijing is planning to provide financial and military support to Moscow, which Russia and China have denied. CNY/
“China appears determined to maintain a diplomatically neutral stance on the war in Ukraine, but any signs of further involvement and action by Western countries could push the dollar-yuan (pair) higher,” they said. Maybank analysts said.
Among the regional actions, the actions in Indonesia .JKSE and Thailand .SETI rose 0.7% and 0.3%, respectively, while benchmarks in Malaysia .KLSESingapore .STI and the Philippines .PSI slipped modestly.
**Philippine c.bank to start tightening in Q4, earlier hike possible – Reuters poll
** China Evergrande, units unable to release annual results by March 31
** Indonesia aims to cut bond issuance target for 2022 by at least 100 trillion rupees ($6.97 billion) – finance minister
Asian stock indices and currencies at 03:48 GMT
($1 = 14,352.0000 rupees)
(Reporting by Sameer Manekar in Bengaluru; Editing by Jacqueline Wong)
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