Asia EM FX On The Back Foot As Post-FOMC Flows Kick In

The Fed's monetary policy decision delivered in U.S. hours Wednesday provided the key driver for USD/Asia crosses. Prominent hawkish overtones in the Fed's rhetoric inspired a risk sell-off

• CNH: Spot USD/CNH advanced sharply, moving away from a new cycle low printed pre-FOMC on Wednesday. A weaker than expected PBOC fix may have rubbed salt into the yuan's wounds, even as the miss was not too impressive. Still, it contrasted with a streak of virtually in-line fixings delivered over the past few days.
• KRW: Spot USD/KRW found itself within touching distance from Jan 7 cycle high of KRW1,203.90, as the won absorbed the impact of the Fed's policy announcement. Geopolitical goings-on provided another source of concern, as North Korea test-fired two ballistic missiles in its sixth missile drill this month.
• IDR: The rupiah remained on the back foot, even as Bank Indonesia Gov Warjiyo signalled that the central bank is currently preparing policy normalisation with the government. The official reiterated that the key policy rate will remain low until there are signs that inflation is picking up.
• MYR: The ringgit plunged to levels last seen on Jan 7, with spot USD/MYR piercing its 50-DMA in the process. Health Min Khairy warned that a wave of infections with the Omicron variant is beginning in Malaysia and he expects daily cases to rise over the coming days.
• PHP: Spot USD/PHP threatened to attack key resistance from PHP51.500, as the post-FOMC impulse outweighed above-forecast Q4 GDP data released out of the Philippines. Econ Planning Sec Chua said that the economy is on track to return to pre-pandemic levels this year.
• THB: The baht went offered amid speculation that the BoT might struggle to keep up with Fed tightening, as the critical tourism sector will take some time to recover.