SYDNEY: Most Asian currencies were tepid on Wednesday, with the Philippine peso falling most, as investors await the conclusion of the Federal Reserve’s (Fed) policy meeting for clarity on the future United States rate path.
The Philippine peso was on track to snap its five-day gaining streak, falling 0.4%, while the Thai baht remained flat.
Traders globally are now focussed on whether the US central bank will keep to its hawkish path to fight soaring inflation or pause interest rate hikes given recent trouble among banks which has included bankruptcy and last-minute rescues.
Markets are pricing in about a 14% chance of the Fed not increasing rates, with a roughly 86% chance of a 25 basis point hike, showed the CME FedWatch tool. Just a month earlier, the market was pricing in a 24% chance of a 50 basis point hike.
The Fed is likely to continue
with calibrated tightening to address inflation risks simply because it makes a distinction between bank-specific stress and systemic risks of contagion, said Vishnu Varathan, Head, Economics & Strategy at Mizuho Bank.
“Markets should not bank on a banking crisis to derail a well-telegraphed 25bp hike, validated by inflation hot spots,” Varathan added.
Currencies elsewhere in the region showed limited moves with the Singapore dollar and Malaysian ringgit steady.
The South Korean won gained 0.3%.
Markets in Indonesia were closed for a public holiday.
In Sri Lanka, the rupee was last up 2.6%.
Source: Reuters
