THE Thai baht led Asian emerging currencies higher on Monday as the U.S. dollar slid on the fallout from the Silicon Valley Bank (SVB) collapse and on hopes the U.S. Federal Reserve may hike interest rates less aggressively going forward.
The Thai baht appreciated as much as 1.6% to 34.43 per dollar and was set to post its sharpest gain since March 1, while the Philippine peso and Singapore dollar gained 0.6% and 0.3%, respectively.
The U.S. administration on Sunday announced a series of emergency measures to shore up confidence in the banking system after SVB's failure threatened to trigger a broader systemic crisis.
The new Bank Term Funding Program, which the Fed announced will make additional funding available, will be taken positively by risk markets, including in Asia and emerging economies, analysts at Morgan Stanley said.
"The SVB episode demonstrates that portfolios' duration risks can trip up financial institutions readily as rates rise," analysts at DBS Bank said in a note.
Financial institutions may face more challenges around refinancing their short-term debt and servicing debt, the note added.
Meanwhile, the United States is due to report inflation data on Tuesday, which will give further clues on the Fed's likely stance on rate hikes and will keep Asian currencies "very volatile" said Alvin Tan, head of Asia FX Strategy at RBC Capital Markets.
Elsewhere in Southeast Asia, the Indonesian rupiah appreciated 0.6%. The country's central bank is expected to hold its policy rate at its upcoming monetary policy meeting, according to a Reuters poll.
The Malaysian ringgit strengthened 0.9% to mark its best day since mid-December.
Data released on Monday showed the country's industrial production rose 1.8% in January, lower than a Reuters poll estimate of 2.6%.
"Latest print shows the tech segment has dipped below trend levels in seasonally adjusted terms. That said, we suspect the earlier Lunar New Year festivities may have exaggerated the weakness," an analyst at Barclays said in a note.
Equities in the region were largely mixed, with Singapore and Malaysia losing up to 1%, while China's Shanghai Composite Index advanced as much as 1%.
"Although we do not think there is any material fundamental impact on Asian stocks from U.S. banking sector issues, there is always risk of some 'skeletons emerging from the closet'," analysts at Nomura said in a note.
"The risk to the view is if U.S. stocks are softer in the months ahead due to weakening economy/recession - in which case, there will be some impact on Asian stocks, too."
Highlights
** Indonesian 10-year benchmark yields are down 5.2 basis points at 6.91%
** China's new premier seeks to reassure private sector as parliament wraps up
** Asian bank stocks tumble as US systemic concerns prevail - Reuters
