Asian FX, stocks pressured as major central banks turn hawkish

  • Rupiah sees worst day in about 2-weeks
  • Indonesian bond yields spike to highest since July
  • Asian stocks fall on U.S.-China tensions; Shanghai off 1%

Dec 17 (Reuters) - Asian currencies eased on Friday, as hawkish global central banks piled pressure on emerging market assets, with the rupiah leading losses a day after Bank Indonesia stood pat on interest rates.

The South Korean won , Singapore's dollar and the Malaysian ringgit fell 0.1% to 0.2% as the greenback steadied in the Asian trading session.

The Bank of England surprised markets on Thursday to become the first major central bank to raise interest rates since the beginning of the pandemic. A day before, the U.S. Federal Reserve had hinted at a faster bond tapering, potentially leading to three rate hikes in 2022. read more

However, Asian central banks are in no rush to tighten monetary policy as inflation pressures in much the region are not as severe and the economic recovery is still at a nascent stage, with BI signalling on Thursday it would not hike rates to match the Fed.

"In the medium term, the drivers for a bullish U.S. dollar remain intact as the Fed is going to start the hiking cycle maybe as early as March," Citi analysts wrote in a note.

Prior going into Fed lift-off, emerging market currencies and debt typically do not perform well, they added.

Asian bonds received their smallest foreign inflows this year in November, with overseas investors selling Indonesian debt for a third straight month. read more

The rupiah slipped 0.3% to 14,387 on Friday to mark its worst session in nearly two weeks, while local bonds, which are favoured by foreign investors due to their high returns, were also sold.

Yield on the benchmark 10-year paper rose 6.4 basis points to 6.486%, its highest level since July.

"The rupiah has traditionally been one of the most vulnerable currencies in the region to sudden shifts in global risk appetite," Gareth Leather, senior Asia economist at Capital Economics, said.

"However, a sharp turnaround in the country's current account position...should make the currency less susceptible."

Shanghai stocks (.SSEC) fell 0.9% to lead losses among regional equities after the United States put investment and export restrictions on dozens of Chinese companies, escalating tensions between the world's top two economies. read more

Equity markets in Thailand (.SETI), South Korea (.KS11), Jakarta (.JKSE) and the Philippine (.PSI) followed suit, down about 0.2% to 0.6%.


** Malaysia stocks (.KLSE) were the sole gainer, with glove makers topping the index

** South Korea's finance minister said on Friday the government will prepare a new KRW4.3 trillion won ($3.62 billion) COVID-19stimulus package read more

** The Bank of Japan announces a policy decision later on Friday, but no change is expected to the core elements of its ultra-loose policy with inflation still stuck well below the central bank's target

($1 = 1,186.5300 won)

Reporting by Anushka Trivedi in Bengaluru Editing by Shri Navaratnam

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