Asian currencies fell on Monday, with most currencies hitting multi-year lows against the dollar, as the US Federal Reserve’s hawkish monetary policy stance stoked economic slowdown fears and raised the greenback’s safe-haven appeal.
Traders in India said the Reserve Bank of India might likely have sold dollars to contain the currency’s decline, which has been touching fresh lows for the last three consecutive sessions.
Malaysia’s ringgit fell 0.4 percent to 4.5960 per dollar, its lowest since January 23, 1998, while the Thai baht hit a more than 16-year low and weakened 0.8 percent.
Singapore’s dollar and Indonesia’s rupiah fell 0.3 percent and 0.6 percent, respectively. Both currencies hit their weakest since April 2020.
“The … combination of tighter financial conditions, persisting USD strength, global growth concerns driven by slowdown in China and Europe, and sustained weakening in RMB past 7 per dollar sets up a challenging stage for pro-cyclical Asian FX,” said Christopher Wong, FX strategist at OCBC.
Risk sentiment was dented as the dollar index, which measures the greenback against a basket of currencies, rose 0.2 percent at 113.38, following the British pound’s searing drop on concerns about the new government’s economic plan.
The dollar, which had earlier reached 114.58 for the first time since May 2002 and was up about 20 percent so far this year, is also being strengthened on the back of a hawkish Fed and its “higher for longer” stance on policy tightening.
“The combination of high US yields (nominal and real), weakening global growth and fragile risk appetite augur well for the USD,” Paul Mackel, global head of FX Research at HSBC Bank said.
