Asian currencies slid on Wednesday as the dollar firmed after US inflation came in hotter than expected, while artificial intelligence-linked stocks in South Korea and Taiwan extended their rally after last week's selloff.
The dollar extended gains in Asian trade to approach a two-week high, after the inflation data and hawkish remarks from Federal Reserve officials raised bets on a rate hike next month.
The reading matched a pace that Federal Reserve Governor Christopher Waller has said would be compatible with a 50-basis-point interest rate increase.
Comments from voting members of the central bank's rate-setting committee signalling continued concern over elevated inflation further bolstered expectations for additional rate hikes.
The benchmark two-year Treasury yield, which is particularly sensitive to interest-rate expectations, climbed overnight to its highest level since October 28. Higher US yields tend to weigh on Asian currencies and stocks as investors reassess the appeal of emerging-market assets.
"Beyond the immediate data risk, we continue to favour a selective recovery in Asian currencies over the medium term, particularly if US rates pressure eases and lower oil prices provide some respite to net oil importers," said Christopher Wong, FX strategist at OCBC.
The Thai baht lost 0.5%, while the Malaysian ringgit weakened to 4.075 per US dollar, its lowest level in a week. Recovering optimism towards chipmakers helped the South Korean won buck the overall trend, gaining 0.6% to 1,334.16 per dollar.
Technology-heavy stock markets in South Korea and Taiwan extended gains, closing 2.6% and 3.6% higher, building on a rebound from a recent AI-led selloff after strong earnings from CoreWeave helped reassure investors about demand for AI infrastructure.
Indonesian stocks fell 0.2% ahead of MSCI's November index review due later in the day, while the rupiah weakened to 18,175 per dollar, not far away from its all-time low of 18,190 hit in June. Investors remained cautious after MSCI warned the country could risk losing its emerging-market status.
In response to concerns raised by MSCI, the Indonesia Stock Exchange recently removed the 5 trillion rupiah ($275.5 million) market-cap threshold from its screening of companies that breach high shareholding concentration rules, as it seeks to improve market transparency.
Thailand's benchmark index advanced 0.4%, while Singapore climbed 1.1%. Malaysian equities, however, bucked the broader trend to fall 0.6%. - Reuters
