Emerging Asian currencies fell on Thursday against a firm dollar, after minutes from the US Federal Reserve’s last meeting tempered market expectations of aggressive rate cuts.
Policymakers were deeply divided on whether to cut interest rates last month but wanted to signal that they were not on a preset path to more cuts, minutes from the July meeting released on Wednesday showed.
Investors now wait to see how dovish Fed Chair Jerome Powell chooses to be in his Jackson Hole speech on Friday.
Following the release of Fed minutes, the greenback rose overnight and held on to its gains on Thursday. The dollar index stood slightly higher at 98.315.
The Korean won was the biggest loser, shedding 0.4 percent, while the Philippine peso gave up 0.3 percent. The Chinese yuan, the bellwether currency for the region, ticked 0.1 percent lower.
The won’s sharp drop comes after it gained 0.7 percent over the last two sessions amid signs of easing in Japan’s curbs on exports from South Korea.
Meanwhile, the Indonesian rupiah barely moved ahead of a central bank meeting later in the day where policymakers are largely expected to keep the key interest rate on hold.
The Indian rupee was among worst performers, shedding 0.2 percent, after minutes from the central bank’s monetary policy meeting revived expectations for further easing.
The minutes released late on Wednesday showed the monetary policy committee’s highest priority was fixing the country’s weak growth, with benign inflation outlook giving the central bank room to cut rates.
“Given the current and evolving inflation and growth scenario at this juncture, it can no longer be a business as usual approach. The economy needs a larger push,” Governor Shaktikanta Das said in the minutes.
DBS Group Research said in a note to clients that markets would, however, be split on the scale of any forthcoming cuts, after the unconventional 35 basis point cut in August.
Since February, the Reserve Bank of India has cut the repo rate by a total of 110 basis points. – Reuters