High oil prices and expectations of interest rate hikes pressure Asian currencies; South Korea, Indonesia, and Japan respond together
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Golden Ten Data reported on June 4 that authorities across Asia are stepping up their defense of local currencies due to pressures from high energy costs and expectations that the Federal Reserve will raise interest rates. On Thursday, South Korea vowed to curb excessive volatility after the won fell to its lowest level against the US dollar since 2009. The Indonesian central bank also stated it is intensifying interventions to stabilize the rupiah, which has dropped to a record low. According to sources, the Bank of Japan is prepared to consider a 25-basis-point rate hike this month. In India, as the rupee hovers near a historic low, the government plans to attract capital inflows by reducing taxes and removing certain bond holding limits. Wee Khoon Chong, Senior Market Strategist for Asia-Pacific at BNY Mellon, said that the tough and fast-changing market conditions mean that central banks and authorities across the region are on high alert, with a strong US dollar, high oil prices, and outflows of foreign capital putting pressure on Asian currencies.
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