The Indonesian rupiah lead losses among Asian currencies and most regional equities fell in a broad based sell-off on Friday, on renewed worries of higher-for-longer Federal Reserve interest rates.
The rupiah depreciated 0.6 percent to hit its lowest level since March 27, becoming the worst performing currency for the day. The country’s central bank in a statement said it was ready to intervene in the foreign exchange market to defend the rupiah when needed.
The Thai baht and Malaysian ringgit eased 0.2 percent while the Taiwan dollar slumped 0.2 percent.
A resilient US jobs data sparked a sell-off in US Treasuries, which in turn reverberated in bond markets across Asia on rising bets that the Fed was not yet done with its rate hiking cycle.
The two-year Treasury yield, which typically moves in step with interest rate expectations, was up 5.1 basis points at 5.002 percent after rising to 5.120 percent, the highest since June 2007.
The dollar held tight ranges as investors closely watched nonfarm payrolls report is due later in the day.
“Strong data print in US is pushing back worries of US recession while on the other hand, PMI indicators in the region including China, Korea, Thailand and Australia continue to point to a deceleration in economic activities,” Chirstopher Wong, FX Strategist at OCBC, wrote in a note.
“We still cannot rule out potential for a USD pullback in the near-term but the higher for longer narrative could continue to keep the USD-Asia pairings buoyant on dips,” Maybank analysts wrote.
However, Barclays analysts said most emerging market assets had historically reacted positively to US economic resilience and the trajectories of central banks in those countries were unlikely be derailed by the Fed.
The South Korean won skidded 0.6 percent. The country’s central bank is scheduled to announce an interest rate decision next week.
Bucking the trend, the Philippines peso and the Singapore dollar rose 0.2 percent and 0.1 percent respectively.
China’s yuan also firmed 0.1 percent, as the central bank’s daily fixing reinforced investor views authorities have little tolerance for heavy slides in the currency. – Reuters
