Asian stocks, currencies fall after hawkish Fed comments

Author of the article: Asian equities and currencies slipped on Wednesday, hurt by the likelihood of more aggressive monetary tightening by the U.S Federal Reserve to curb inflation, while the focus also remained on new sanctions against Russia over its invasion of Ukraine. The South Korean won led losses among Asian currencies, easing 0.6%, followed…
Asian stocks, currencies fall after hawkish Fed comments

Author of the article:

Asian equities and currencies slipped on

Wednesday, hurt by the likelihood of more aggressive monetary

tightening by the U.S Federal Reserve to curb inflation, while

the focus also remained on new sanctions against Russia over its

invasion of Ukraine.

The South Korean won led losses among Asian

currencies, easing 0.6%, followed by the Malaysian ringgit

which fell 0.2%. The rupiah fell 0.1% to hit a

four-week low.

The U.S. dollar rose to a two-year high after Fed

governor Lael Brainard said overnight she expected a combination

of interest rate rises and a rapid balance sheet runoff to take

U.S. monetary policy to a “more neutral position” later this

year.

“Asian currencies could see a sell-off in the short term

given the Fed’s hawkish stance and we see it stabilizing only in

the second half once the Fed reassesses its monetary position,”

said Chang Wei Lang, macro strategist (FX and credit) at DBS

Bank.

Stocks in the region were also hit, with the Philippine

benchmark and Singaporean shares shedding 0.5%

each, while equities in Indonesia eyed their worst

session in nearly two weeks, falling 0.6%.

The United States and its allies are proposing new sanctions

against Russia over civilian killings in northern Ukraine, which

it denies. The sanctions could include European commission’s

proposal to ban imports of Russian coal to EU nations.

This could prompt coal miners in Indonesia, the world’s

largest coal exporters, to ramp up exports. Shares of major

producers Adaro Energy and Bumi Resources

climbed 1.3% and 6.7%, respectively, outperforming the

Indonesian benchmark index.

The Shanghai Composite Index, trading after a

two-day holiday, slipped marginally as Chinese authorities

extended a lockdown in Shanghai on Tuesday despite growing

unrest over quarantine rules.

The Fed comments also pushed U.S. Treasury yields to

multi-year highs with the spread between two-year and

10-year Treasury yields gaining after having been

negative for the most part since last week.

“A 50 basis point hike by the Fed is on the table for the

next two meetings and we can expect some degree of correction in

Asian equities,” Wei Lang added.

Yields on Singapore 10-year bond rose marginally

to 2.352%, while Indonesia’s benchmark bond yields

rose to 6.776%.

Meanwhile, data showed the Russia-Ukraine war and the

resulting spike in commodity prices have triggered steep foreign

outflows from Asian equities for the month of March, their

highest outflows since March 2020.

The Asia Development Bank also joined the World Bank in

flagging slower growth in Asia in 2022 on account of the

Russia-Ukraine war.

HIGHLIGHTS:

** Real estate stocks Fortune Mate and Dian

Swastatik top losers on Indonesia’s benchmark index

** Cross-border investors sold Asian equities worth a net

$16.23 billion in March

** Stocks in China down 0.2%

Asia stock indexes and currencies

at 0451 GMT

COUNTRY FX RIC FX FX INDE STOCKS STOCKS

DAILY % YTD % X DAILY YTD %

%

Japan -0.21 -7.09 <.n2>

China EC>

India -0.30 -1.61 <.ns ei>

Indonesi -0.13 -0.79 <.jk a se>

Malaysia -0.19 -1.25 <.kl se>

Philippi -0.21 -0.78 <.ps nes i>

S.Korea 11>

Singapor -0.07 -0.83 <.st e i>

Taiwan -0.33 -3.85 <.tw ii>

(Reporting by Tejaswi Marthi in Bengaluru; Editing by Kim

Coghill)

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