June 24, 2022

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Asian stocks, FX rebound as Fed policy soothes inflation view

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Most Asian currencies firmed on Thursday

after the U.S. Federal Reserve raised rates by three-quarters of

a percentage point, with the Taiwan dollar holding steady ahead

of a widely expected hike in the country’s policy rate later in

the day.

The Taiwan dollar inched marginally higher as

investors await a decision by the country’s central bank. The

bank is expected to again raise its policy rate, according to

all economists polled by Reuters, to help fend off inflation now

at an almost 10-year high.

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“The central bank (of Taiwan) is going to hike today. The

question is whether it will follow the Fed’s 75 bps hike from

the current 1.375%… A hike of 75 bps or even 50 bps could

deter investment demand from manufacturers. A 75 bps hike is

likely to lead to a jump in TWD against USD,” ING analysts

wrote.

After hitting multi-month lows earlier this week, most

regional currencies firmed on Thursday after U.S. bond yields

and the dollar retreated from multi-year highs a day earlier as

investors welcomed the Fed’s decision to raise interest rates –

its biggest increase since 1994.

The Fed’s aggressive stance helped buoy investor confidence

that the central bank of the world’s largest economy would be

able to tame rising inflation earlier than expected and without

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sparking a recession.

“In line with our expectations, the FOMC meeting turned out

to be a ‘buy the rumor, sell the fact’ event,” said Philip Wee,

FX strategist at DBS Bank, adding that investors are “encouraged

that the Fed is now less behind the curve on inflation.”

The Indonesian rupiah firmed 0.1%, after falling…

Reuters

2022-06-16 01:01:17

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