June 11, 2020 / 10:48 AM / 22 days ago

EMERGING MARKETS-Asian shares, FX drop as Fed dashes hopes for swift recovery

    * Dollar rebound reverse gains by Asia FX 
    * Fed forecast douses hopes for swift global recovery
    * Thai baht at 4-month high

    By Nikhil Nainan
    June 11 (Reuters) - Emerging Asian stock and currency
markets fell on Thursday after the Federal Reserve dashed hopes
of a quick recovery from coronavirus-driven lockdowns, sending
investors scurrying for the security of the dollar.
    Singapore's Straits Times Index led declines across
the Southeast Asian region, plunging 3.5%, while Jakarta
, Kuala Lumpur and Bangkok fell more than
1%.
    The Fed promised to keep pumping funds into an economy
hammered by the COVID-19 pandemic, adding that the U.S. economy
would shrink 6.5% this year and require years of emergency aid
to recover fully.
    Chairman Jerome Powell raised the prospect of yield curve
control, which lent initial support to most of the region's
higher-yielding currencies, which look more attractive when
investors have more cheaply-borrowed funds to allocate.
    The U.S. dollar found its footing later in Asian hours,
coming off a three-month low it hit in the previous session and
reversing gains of most riskier currencies in the region.
    "We have now seen initial pockets of U.S. dollar weakness
flip to more marked dollar strength throughout the session
following the FOMC which was dovish slightly beyond our dovish
expectations," Citi analysts said, noting it could be a squeeze
of dollar shorts following Powell's gloomy outlook.
    Still, the Thai baht rose 0.7% to a four-month high
and Malaysia's ringgit strengthened 0.1%.
    "We're seeing money coming back into Thailand and investment
in fixed income in particular," said Chatree Rojana-arpa an
executive at brokerage KTB Securities Thailand in Bangkok.
    Benchmark 10-year Thai bond yields fell to a
near two-week low on Thursday and are down 19 basis points this
week, as investors bought emerging government debt. 
    Tourism forms a significant part of the Thai economy and
with the country reporting no new coronavirus cases for the
first time in nearly three weeks there is growing hope that
things will start to pick up.

    Elsewhere, the dollar's rebound turned the tables on
Indonesia's rupiah, which weakened 0.2% to 13,950. 
    The Singapore dollar fell 0.2%.
    Interest-rate driven sectors in Singapore including banking
and real estate stocks led equity declines. 
                   Change on the day at 0946 GMT
 COUNTRY      FX DAILY %  FX YTD %  STOCKS DAILY %  STOCKS YTD %
 Japan        +0.19       +1.61     -2.82           -5.00
 China        -0.05       -1.45     -0.78           -4.24
 India        -0.26       -5.81     -2.02           -18.55
 Indonesia    -0.22       -0.50     -1.34           -22.93
 Malaysia     +0.14       -3.63     -1.14           -1.98
 Philippines  -0.33       +1.01     0.57            -17.13
 S.Korea      -0.43       -3.34     -0.86           -0.95
 Singapore    -0.22       -3.01     -3.44           -16.09
 Taiwan       -0.06       +1.25     -1.57           -3.85
 Thailand     +0.74       -3.27     -1.55           -11.59
 
 (Reporting by Nikhil Kurian Nainan in Bengaluru, additional
reporting by Tom Westbrook in Singapore; editing by Patrick
Graham and Amy Caren Daniel)
  
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