The baht continued to drift below 38 to the US dollar as most Asian currencies headed for weekly losses on Friday.
The Malaysian ringgit was down for an eighth straight week, dented by a resilient dollar and soaring Treasury yields on prospects of more hefty rate hikes by the Federal Reserve.
US Treasuries have entered the longest sustained slump in 38 years, as Federal Reserve policy makers signal their determination to keep raising interest rates until they are sure inflation is under control. The yield on benchmark 10-year notes jumped 23 basis points this week to 4.26% on Friday.
The baht was trading around 38.32 to the dollar in offshore markets on Friday afternoon. Locally, the weighted-average Interbank Exchange Rate was quoted at 38.31 at the close of business on Thursday, according to the Bank of Thailand.
The appetite for riskier assets in emerging markets has been dampened by mounting fears of a global recession, entrenched inflation, and hawkish comments from Fed officials.
The Chinese yuan hovered around lows not seen since the global financial crisis of 2008, partly because of stringent Covid-19 lockdowns. It has declined more than 12% so far this year, weighing on the currencies of the region. For the day, the yuan led losses among its peers, shedding 0.4%.
Meanwhile, authorities continued to set firmer-than-expected yuan guidance in a bid to keep the currency stable amid the ongoing Communist Party Congress, which will end this weekend with the expected approval of a precedent-setting third term for Xi Jinping.
“The 2023 economic outlook depends on whether a China reopening will materialise to offset the impact from a global recession. Any shift from zero-Covid will, however, be slow and incremental,” analysts at Maybank wrote this week.
A China reopening will help Asean decouple from a US recession, with Thailand and Vietnam likely to benefit the most from the return of Chinese visitors, while Indonesia and Malaysia may benefit from the revival of Chinese Belt & Road investments, they said.
Among other emerging Asian currencies, the Malaysian ringgit eased as much as 0.2% to trade near a 25-year low, where it has been since mid-September. It was set to end the week 0.7% lower for its eighth consecutive loss.
Malaysia reported an annual inflation of 4.5% for September, slightly less than a Reuters forecast and below the 4.7% seen in August. Analysts at Goldman Sachs forecast Bank Negara Malaysia would increase its benchmark rate by 25 basis points per meeting from the fourth quarter of this year to mid-2023, bringing the policy rate up to 3.5% from 2.5% currently.
Elsewhere in Asia, the Indonesian rupiah was on track for a sixth straight weekly drop. The baht and the Singapore dollar depreciated about 0.3% each, while the Vietnamese dong hit a record low. The Philippine peso was the only outlier, appreciating 0.2% after trading flat in early deals.
Finance ministers from the Asia-Pacific Economic Cooperation (Apec) group, meeting in Bangkok, said authorities would use monetary, fiscal and structural tools to manage inflationary pressures, and also “refrain from competitive devaluation and will not adjust exchange rates for competitive purposes”.
