The Singaporean dollar led gains among emerging Asian currencies on Thursday, supported by monetary policy tightening to curb inflation, while South Korean shares wobbled after a surprise interest rate hike from the central bank.
The Singaporean dollar advanced 0.8 percent to post its sharpest gain since Aug. 27, after the Monetary Authority of Singapore (MAS) moved its currency-based policy band higher, adding to global central banks’ efforts to fight red-hot inflation.
DBS analysts said in a note that three policy tightening measures by the MAS since last October had put it ahead of other central banks in beginning to normalize monetary policy and trying to control inflation.
“While they are cognizant of the risks to growth from geopolitics, they are looking at a lot more inflationary pressure in the economy, both from external, but also due to a much tighter labor market than they had previously expected, so that’s where the hawkish element comes in,” said Khoon Goh, head of Asia research at ANZ.
Singapore and South Korea both tightened monetary policies, hot on the heels of recent rate hikes in the United States, Canada, and New Zealand, bringing into focus the need for other regional central banks to contemplate similar measures to contain inflation.
“We assess the accumulation of downside risks to global growth (geopolitics, China’s zero-COVID led restrictions, etc.) and looming aggressive tightening of policy by the Fed risks tighter financial conditions in weeks ahead,” Citi analysts said.
A pullback in the greenback overnight supported currencies across the region. The Taiwan dollar and the South Korean won firmed 0.3 percent each.
Indonesia’s rupiah was up about 0.2 percent with a Reuters poll indicating that the Bank Indonesia will raise interest rates next quarter on expectations of a hawkish stance by the US Federal Reserve and higher inflation.
