Chinese authorities try to stabilize the yuan as it nears a 14-year low

(AFP file photo)

The baht continued to drift below 38 against the US dollar as most Asian currencies headed for weekly losses on Friday.

The Malaysian ringgit was down for an eighth consecutive week, shaken by a resilient dollar and surging Treasury yields on the prospect of bigger rate hikes by the Federal Reserve.

US Treasuries have entered the longest sustained recession in 38 years as Federal Reserve policymakers signal their determination to keep raising interest rates until they are sure the inflation is under control. The yield on benchmark 10-year bonds 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 listed at 38.31 at the close of business on Thursday, according to the Bank of Thailand.

Appetite for riskier assets in emerging markets was dampened by growing fears of a global recession, entrenched inflation and hawkish comments from Fed officials.

The Chinese yuan has hovered around lows not seen since the 2008 global financial crisis, in part due to strict Covid-19 lockdowns. It has fallen more than 12% so far this year, weighing on currencies in the region. For the day, the yuan led the losses among its peers, losing 0.4%.

Meanwhile, authorities continued to set firmer-than-expected guidance for the yuan in a bid to maintain currency stability amid the ongoing Communist Party Congress, which ends this weekend with the expected approval of an unprecedented third term for Xi Jinping.

“The economic outlook for 2023 hinges on a successful reopening of China to offset the impact of a global recession. Any Covid-zeroing, however, will be slow and gradual,” Maybank analysts wrote this week.

A reopening of China will help Asean decouple from a US recession, with Thailand and Vietnam likely to benefit the most from returning Chinese visitors, while Indonesia and Malaysia could benefit from the investment revival Chinese in the Belt and Road, they said.

Among other emerging Asian currencies, the Malaysian ringgit eased 0.2% to trade near a 25-year low, where it has been since mid-September. It was expected to end the week down 0.7% for its eighth straight loss.

Malaysia reported annual inflation of 4.5% for September, slightly below Reuters forecasts and lower than the 4.7% seen in August. Goldman Sachs analysts expect Bank Negara Malaysia to raise its benchmark rate by 25 basis points per meeting from the fourth quarter of this year to mid-2023, taking the benchmark rate to 3.5% from the current 2.5% .

Elsewhere in Asia, the Indonesian rupiah was on course for a sixth straight weekly decline. The baht and the Singapore dollar depreciated by around 0.3% each, while the Vietnamese dong hit a record high. The Philippine peso was the only outlier, appreciating 0.2% after being flat in early trades.

Finance ministers from the Asia-Pacific Economic Cooperation (Apec) group, meeting in Bangkok, said the authorities would use monetary, fiscal and structural tools to manage inflationary pressures, and also “refrain from competitively devaluing and would not adjust exchange rates for competitive purposes”. .