Asian FX subdued on renewed recession fears; local rate decisions in focus

Asian currencies were under pressure on Thursday, led by losses in Thailand's baht, as bleak U.S. data indicating weakening demand in world's largest economy stoked recession worries.

Overnight data showed U.S. retail sales fell by the most in a year in December, while manufacturing output recorded its biggest drop in nearly two years, pushing up demand for the safe-haven dollar.

Adding to the sombre mood, officials from U.S. Federal Reserve indicated their willingness to push on with more interest rate hikes, with several supporting a top policy rate of at least 5%.

The Thai baht USDTHB emerged as the biggest loser among its peers, shedding as much as 1.1% and on track for its worst session in a month if losses hold.

The Philippine peso USDPHP fell as much as 0.6%.

"Today has been a pure dollar move, which has been very much related to the U.S equity market sell-off, after weak data from the U.S. and the Fed's call for more rate hikes to beat inflation," Sailesh Jha, group chief economist and head of financial market research at RHB Bank, said.

Elsewhere in Asia, Bank Indonesia (BI) and Bank Negara Malaysia (BNM), central banks of their respective countries, are expected raise key interest rates by 25 basis points (bp) each to 5.75% and 3%, as they look to bring inflation under control.

Julia Goh, a senior economist at UOB, said Malaysia's new government was also expected to announce "targeted fiscal support and continuation of key infrastructure projects" when it unveils the 2023 budget on Feb. 24.

The Indonesian rupiah USDIDR remained largely unchanged, while stocks in Jakarta COMPOSITE rose 0.6%.

The Malaysian ringgit USDMYR edged down 0.1%, while stocks in Kuala Lumpur BURSA added 0.1%.

The Chinese yuan USDCNY shed 0.1%, while the South Korean won USDKRW rose 0.2%.

A Reuters survey showed that China is expected to keep its benchmark lending rates unchanged for a fifth month in January, with analysts expecting cuts next month after the central bank vowed steps to boost the COVID-19 hit economy.

Equities across the region remained mixed, with stocks in South Korea KOSPI rising 0.4%, while shares in Singapore STI fell 0.3%.

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