Manila:Most emerging-market currencies in Asia experienced a decline today following US inflation data that strengthened expectations of an interest rate increase by the Federal Reserve. This development has raised investor worries about higher borrowing costs and put pressure on artificial-intelligence-linked equities globally.
According to Oman News Agency, the South Korean won dropped more than 1% to a two-week low of 1,352.84 per dollar. Similarly, the Taiwan dollar fell sharply to 32.325, its weakest level since early August, driven by heavy selloffs in chipmaker stocks in both countries. South Korea's Kospi index fell over 8%, prompting a trading halt for the first time in two and a half months. Major chipmakers Samsung Electronics and SK Hynix saw their shares plunge about 10% and 12%, respectively, marking their worst daily performance since late July. In Taiwan, stocks declined by 3.8% to reach their lowest point in about a month, with TSMC shares decreasing nearly 3%.
In Southeast Asia, the Philippine peso hit a record low of 63.09 per dollar, affected by rising oil prices, El Niño-related risks to food prices, high inflation, sluggish growth, and a worsening current-account situation. Analysts from Goldman Sachs anticipate the peso will remain under pressure and predict the Philippine central bank will raise interest rates twice more by 25 basis points each, with the first increase expected next week. They highlighted that a widening current-account deficit and decreasing foreign investment flows are increasing the currency's vulnerability, suggesting the central bank may need to be cautious in using reserves to support the peso.
Recent data showed that US consumer prices rose last month at a pace faster than anticipated, reinforcing the likelihood of another Federal Reserve rate hike, potentially this month. Such increases typically strengthen the dollar and negatively impact emerging-market currencies, leading to potential capital outflows from equity and bond markets and increasing the cost of dollar-denominated borrowing. The dollar index, which measures the US currency against a basket of major currencies, reached a new 18-month high after the inflation data, but later lost most gains following cautious comments from Federal Reserve officials.
In Indonesia, the rupiah weakened to 17,955 per dollar, with stocks declining over 2%. Singaporean equities also fell about 1% to a three-month low, with shares of DBS Group and OCBC each dropping around 1%. In contrast, the Indian rupee saw a slight increase at the open, reaching 94.885 per dollar. Traders expect the Reserve Bank of India to continue supporting the local currency by selling dollars through state-owned banks.