Thai baht soars 1% on rate hike drum roll; S.Korea’s won slips

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The Thai baht appreciated more than 1% on Monday, logging a strong start

to the month which is expected to see the country finally join its regional and global peers in

normalizing its pandemic-era stimulus policy as the economy gains traction.

Japan’s yen was trading at an over six-week high, firming more than half a percent as

the U.S. dollar drifted near its three-week low, while rest other Asian currencies traded

slightly lower against the greenback.

The Thai baht, opening after an extended weekend, jumped as much as 1.3% to 36.160

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per dollar – its best intraday move since May 5 – after the central bank on Friday said it was

highly likely to raise its key policy rate next week, its first hike since late 2018.

“Although several Asian central banks have surprised markets on the hawkish side this year,

Thailand’s policymakers are likely to take a more cautious approach,” analysts at Goldman Sachs

said in a note.

They expect the Bank of Thailand (BoT) to hike its rate by 25 basis points (bps) – expected

widely as the central bank is seen moving gradually towards tightening considering nascent

recovery amid persistent inflation headwind.

Thailand, Southeast Asia’s second-largest economy and a net-oil importing nation, is

expected to grow 3.3% this year, according to the BoT’s outlook, compared with only 1.5% last

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year. The inflation rate is seen peaking in the current quarter, averaging significantly above

its target range of 1% to 3%.

Barclays analysts expect July inflation – set to be released later this week – to be nearly

steady on a sequential basis driven by a drop in oil prices.

Meanwhile, data showed China’s factory activity logged slower growth in July just a month

after rebounding strongly, with persistent demand weakness and COVID-19 outbreaks.

Elsewhere in Southeast Asia, South Korea’s won weakened as much as 0.8%, marking

its worst day in over two weeks, while Indonesia’s rupiah and Taiwan’s dollar

slipped about 0.3% each.

Indonesia’s 10-year benchmark bond yield was trading at 7.104%, down 9.3 pips on

inflows following slight outlook improvement.

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Later in the week, data is expected to show Southeast Asia’s largest economy grew 5.1% in

the second quarter, according to a Reuters poll, while analysts at Barclays expect 3.5% growth.

Meanwhile, inflation in July accelerated to a seven-year high, pressuring the central bank to

begin normalization.

Among equities, shares in Singapore and Thailand advanced about 0.9% and

0.6%, respectively, while equities in the Philippines were down 1.1%.

HIGHLIGHTS:

** Indonesian 5-year yields fall 18.7 basis points to 6.438%

** HSBC H1 pretax profit falls 15%, increases profitability goal

** China’s Alibaba strives to keep New York listing amid audit dispute

Asia stock

indexes and

currencies

at 0445 GMT

COUNTRY FX FX FX INDEX STOCKS STOCKS

RIC DAILY % YTD % DAILY % YTD %

Japan +0.51 -13.15 0.61 -4.5

China -0.17 -5.92 0.16 -10.48

India +0.11 -6.10 0.54 -0.60

Indonesia -0.32 -4.21 0.28 5.92

Malaysia -0.01 -6.40 0.32 -2.63

Philippines -0.14 -7.99 -1.05 -12.25

S.Korea -0.55 -9.01 0.08 -17.60

Singapore +0.07 -2.21 0.89 3.73

Taiwan -0.20 -7.74 -0.39 -17.99

Thailand +1.03 -7.95 0.68 -4.25

(Reporting by Sameer Manekar in Bengaluru; Editing by Christopher Cushing)