ASIAN emerging currencies traded without much direction on Wednesday as the U.S. dollar wobbled on retreating expectations of a U.S. Federal Reserve rate hike next week, while the Turkish lira depreciated more than 6% to a record low level against the dollar.
In Asia, the Philippine peso and the South Korean won appreciated 0.1% and 0.4% against the U.S. dollar, with the won trading at its highest level since April 14.
The Turkish lira weakened 6.1% to a record low level of 22.85 per dollar, as authorities appeared to loosen stabilising measures after the government signalled a pivot to more orthodox policies.
The U.S. dollar index slipped marginally to 104.220, recovering from an early trade dip, as markets priced in a roughly 19% chance that the Fed would raise rates by a quarter-point next week, according to the CME FedWatch tool.
Poon Panichpibool, a markets strategist at Krung Thai Bank, expects the Fed's June meeting to be the end of its tightening cycle, eventually leading to a downward trend in the U.S. dollar.
"Any dovish comments from the Fed chairman/officials or from the FOMC (Federal Open Market Committee) statement should trigger more profit-taking on the long USD positions," Panichpibool said.
China's yuan fell 0.1%, giving back ground gained in early trade after weak export data, but remained supported on news that the country's top banks had been told to lower their dollar deposit interest rates to bolster the yuan.
Panichpibool added that underperformance in Chinese stocks and yuan could spill over into Asian emerging currencies, especially countries like Vietnam and Thailand that rely heavily on China for trade.
Meanwhile, the Indonesian rupiah was the only other currency weakening against the U.S. dollar, losing 0.2%, while the Singaporean dollar was largely flat.
Among equities, Malaysia's benchmark declined 0.8% to its lowest level in more than three years, while those in Manila and India added 0.3% and 0.6%, respectively.
Japan's Nikkei reversed course to decline 1.8%, marking its worst drop in nearly three months, as investors turned cautious after a near 1% rally in the prior session.
Meanwhile, investors in India are awaiting the central bank's interest rate decision.
A Reuters poll of 64 economists showed the Reserve Bank of India will keep the key rate unchanged at 6.5% on Thursday and for the rest of the year.
** Indonesian 10-year benchmark yields fall 3.4 basis points to 6.321%
** World Bank cuts 2024 global growth forecast as rate hikes bite but lifts 2023 outlook
** Thai business group keeps 2023 GDP growth outlook at 3.0-3.5% - Reuters