On Wednesday, most Asian currencies fell to their lowest levels in over a year as investors waited for a rise in interest rates and more hawkish signals by the U.S. Federal Reserve.
The Philippine peso suffered the worst performance, falling 0.6% to a new record low. Meanwhile, the Malaysian Ringgit dropped 0.2% to its lowest level in 25 years, reaching 0.2%.
The Japanese Japanese yen hovered just under a 24-year low while the Indian rupee briefly exceeded 80 to the dollar, close to a new record low.
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U.S. U.S. Hotter-than-expected U.S. Inflation data from the United States last week saw traders price in the possibility of a 100 basis-point increase.
Both the dollar futures and index futures traded below their 20-year highs. With U.S. interest rate expected to rise well above 4% by year’s end, both indexes were trading just below their 20-year highs. They would be at the 2008 financial crisis’s highest levels.
As a result of a series rate hikes by Fed, Asian currencies fell sharply in this year. This was due to the narrowing of the gap between high-risk and low-risk debt. As inflation rose, increasing fears of a global economic downturn have severely impacted the appetite for risk-driven, high-yield assets.
Investors will be keeping an eye out for clues from the Fed about its plans for future rate increases and the outlook of inflation to gauge the impact on regional markets over the course of the year. The Fed indicated that it will continue raising rates until inflation falls within its target range.
China’s currency dropped 0.4% to a record low of over two years. A European industry group warned about China’s viability and investment potential amid ongoing disruptions due to COVID-linked lockdowns.
Related: Japan is unlikely to interfere to stop the weak yen, according to a Asian tarde poll of analysts.
The yuan is among the worst performing Asian currencies this year. This is due to China’s unwillingness to reduce its zero-COVID policies, which has halted economic activity.