MANILA, Feb 7 (Reuters): The Malaysian ringgit led losses among Asian emerging currencies on Tuesday, as markets weighed hawkish signals from global central banks and considered the likelihood of further interest rate hikes.
The ringgit, which has gained 2.5% so far this year, weakened 0.8% to a more than two-week low. Indonesia's rupiah fell 0.6% and the Philippine peso slipped 0.4%.
Both currencies hit their lowest since Jan. 20. In contrast, Thailand's baht rose 0.5% and the Singapore dollar inched 0.1% higher.
Annual inflation in the Philippines blew past expectations in January to reach a fresh 14-year high on surging food prices, raising the chance the central bank will deliver a bigger interest rate hike to tame prices when it meets next week.
"We believe Governor (Felipe M.) Medalla will whip out a 50bp (basis points) rate increase in an attempt to get ahead of surging inflation," said Nicholas Mapa, senior economist with ING.
"Medalla previously sounded off on the possibility of pausing 'as early as the first quarter' but today's inflation report likely means BSP (Bangko Sentral ng Pilipinas) will need to stay hawkish in the near term."
Equities in Manila shed 0.1% on prospects of a larger rate hike. Meanwhile, investors await the U.S. Federal Reserve chief's speech at the Economic Club of Washington later in the day.
"All eyes will be on Fed Chair Jerome Powell's comments ahead, with the recent strength in the labour market seemingly opening the door for more hawkishness," said Yeap Jun Rong, a market analyst at IG.
"That said, sticking to his script at the recent Federal Open Market Committee meeting with not too many surprises could see risk sentiments recover, in line with the upward bias presented from the broader trend."
The dollar index, which hit a near one-month high of 103.76 on Monday, slipped 0.1% to 103.47 as of 0335 GMT.
Equities across South-East Asia were largely subdued, with stocks in Jakarta rising 0.8% and Seoul shares up 0.6%. Stocks in Kuala Lumpur declined 0.6% and Singapore's benchmark index eased 0.1%. - Reuters