Most emerging Asian currencies traded cautiously on Monday, with Vietnam’s dong stumbling after an effective devaluation, while investors braced for more US rate hikes that will raise risks of a global recession.
The State Bank of Vietnam (SBV) effectively devalued the dong currency by widening the exchange rate trading band to 5.0% from 3.0% on Monday, following a sharp fall in the currency on global market jitters.
The dong fell 0.66% to a record low of 24,270 per dollar on Monday at 0418 GMT.
Global sentiment took a fresh hit as a deteriorating inflation outlook kept investors worried about recession as the US Federal Reserve stays on its aggressive rate hike path.
Markets are now fully expecting the Fed to hike rates by 75 basis points (bp) next month, and likely by the same again in December.
Investors also kept a nervous eye on UK bonds now that the Bank of England’s (BoE’s) emergency buying spree is over.
“While the market was quick to price 66 bp for December following the hot CPI print, the continued destabilisation of the 10-year will remain a significant headwind to risk,” said Stephen Innes, managing partner at SPI Asset Management.
“That headwind will likely get worse before it gets better this week as the BoE steps back from bond buying.”
The Chinese yuan saw a marginal 0.1% fall, hitting its lowest in nearly three weeks.
Asian currencies mixed despite hot US CPI, shares rise
“Of note, the absence of a shift from COVID-zero strategy could also weigh on the yuan and regional currencies,” analysts at Maybank said in a research note.
In China, the week-long Communist Party Congress which began on Sunday is expected to grant a third term to President Xi Jinping.
Key economic data on China’s third quarter real GDP and September’s industrial data are due on Tuesday. The data is expected to underline the intensifying challenges at home and abroad for the world’s second-largest economy, a Reuters poll showed.
Elsewhere in Asia, the South Korean won depreciated 0.6%, while the Taiwanese dollar weakened 0.4%, leading the falls for the day.
Additionally, the Singapore dollar and Philippine peso remained largely flat.
Singapore recorded a 3.1% rise in its non-oil domestic exports in September which was slower compared with last month and missed forecasts due to declines in shipments for the Chinese and Hong Kong markets.
The Malaysian ringgit weakened 0.3%, hitting its lowest since 1998 while the Indonesian baht fell 0.3%. Malaysia is scheduled to report its September CPI inflation numbers later in the week.
Equities across emerging Asian markets fell between 0.1% to 2.3%, while markets in the Philippines and Malaysia remained the only outliers, gaining over 1% and 0.2%, respectively.