Asian bourses paused on Thursday and most emerging market currencies in the region fell after the US Federal Reserve issued its fourth straight 0.75% interest rate hike, with chairman Jerome Powell suggesting the policy will continue to control inflation.
Hong Kong's Hang Seng index sank 3.08% on Thursday, while several other Asian stock markets posted moderate dips after the Fed's anticipated move. The new policy rate of 3.75-4% is the highest level since January 2008. The Fed has hiked rates six times this year.
Mr Powell reinforced expectations of more rate increases, saying "we still have some ways to go" until borrowing costs are at the necessary level, adding "it is very premature to be thinking about pausing".
The market projects more rate hikes at the next meeting in December, though the level of the increase may change.
"It may come as soon as the next meeting or the one after that," he said.
Some Asian central banks followed suit. The Hong Kong Monetary Authority (HKMA) on Thursday raised its base rate charged via the overnight discount window by 75 basis points to 4.25% and warned that households should brace for a period of higher commercial rates and carefully manage financial risks.
The HKMA's move prompted the city's largest commercial bank, HSBC, to increase its best lending rate by 25 basis points to 5.375%, effective from today. This follows the bank's 12.5-basis point hike in September, the first increase in four years.
The Philippine central bank said it would increase its benchmark interest rate by 75 basis points from the current 4.25% at its Nov 17 meeting. The move was partially in response to the peso's depreciation to 58.47 to the dollar, the weakest in 13 years.
The Stock Exchange of Thailand (SET) index opened slightly lower in early trade on Thursday, but rebounded in the afternoon with investors buying banking stocks. While the SET outperformed other regional markets, the baht was down slightly to 37.80 against the greenback from 37.58 a day earlier.
"We forecast the baht to remain resistant at 38 to the dollar, depending on how much foreign money flows out of the bond market," said Poon Panichpiboon, money market strategist at Krungthai Bank.
Analysts at Krungsri Securities said the Fed signalled it would continue rate hikes as inflation remained at a 40-year peak of 8.2%.
"US interest rates should keep rising. That is negative news for investors," said the brokerage.
Other Asian currencies were pressured by a buoyant dollar, with Malaysia's ringgit hitting a 24-year low despite an interest rate hike. Bank Negara Malaysia raised its overnight policy rate by 25 basis points to 2.75% as it seeks to cool inflation. The Chinese yuan fell 0.2% and traded close to a near 15-year low. The Philippine peso was down 0.6%, while the Indonesian rupiah and the South Korean won fell 0.2% each. The Indian rupee shed 0.1%.
