EMERGING MARKETS – Fed’s Hawkish Comment Stifles Asian Currency, Stock Rally

* South Korean won, Taiwanese dollar lags * Vietnamese stocks hit lowest level since February 2021 * All eyes are on US nonfarm payrolls Taiwanese dollar is the one with the most fell further, with hawkish comments from US Federal Reserve officials reinforcing the central bank’s intention for more rate hikes. Several Fed officials have affirmed their commitment to rein in soaring inflation, with no intention of backing down from the most aggressive rate hike campaign in decades. Although some weak economic data from the United States during the week suggested that the economy could start to feel the effects of the aggressive tightening, other data supported the need for further rate hikes in the coming months. Soaring inflation, rising U.S. interest rates and slowing global growth have led to a drastic shift in investment to safer safe havens such as U.S. dollar assets led by treasury bills. Treasure. Markets are now eagerly awaiting the non-farm payrolls of the world’s largest economy later in the global day, which together with September’s inflation report next week could provide more clues to the outlook. from the Fed. At 04:00 GMT, the dollar index, which measures the strength of the greenback against a basket of currencies, stood at 112.11. The South Korean won led emerging market currency losses for the day, dropping as much as 0.8% for its worst day since Sept. 28, after the Asian trade baron announced his biggest account deficit. current for August in over two years. The currency, however, is up around 1.7% in a week truncated by the holidays. “A sharp deterioration in (South) Korea’s trade balance has been a major reason for the won’s recent underperformance,” Goldman Sachs analysts wrote. “A recovery in current account balances, along with the government’s multi-market stabilization measures, should help support the currency,” they added. The Taiwanese dollar fell about 0.3%, although it was up 1% for the week, a day after reporting a marginal rise in inflation in September, broadly in line with market expectations. Rising oil prices did not help the Malaysian ringgit, which was down around 0.3%. The nation is set to table its 2023 budget, amid anticipated election speculation. Others, like the Indonesian rupiah and the Philippine peso, fell 0.3% and 0.1% respectively. Among Asian stocks, Vietnamese stocks lost the most, shedding as much as 3.7% to their lowest level since February 2021. The index has lost around 28.9% since the start of the year. Analysts at United Overseas Bank say the Southeast Asian country was the hardest hit by stock outflows, noting around $7 million in overseas sales on Thursday. Elsewhere, stock indices in Indonesia, Malaysia, Thailand and the Philippines lost between 0.4% and 0.8%. HIGHLIGHTS: **Indonesia’s 10-year benchmark yield rises to 7.221%** BOK chief says inflation could stay around 5% until H1 2023, justifies rate hikes **No peace for Indian rupee as mighty dollar tumbles** Indonesia’s foreign exchange reserves fall to $130.8bn at end-September Asian stock indices and currencies at 0400 GMT -0.32 Indonesia – 0.33 -6.47 -0.63 6.84 a Malaysia -0.28 -10.4 -0.77 -10.09 1 Philippines -0.07 -13.3 -0.30 -16.93 nes 4 South Korea 6 Singapore +0.00 -5.60 0.29 1.18 e Taiwan -0.30 -12.4 – 1.17 -24.64 4 Thailand -0.16 -10.7 – 0.54 -4.64 7 (Report by Archishma Iyer in Bengaluru Edited by Shri Navaratnam)

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