Asian markets to edge lower on hawkish tone from Fed – ING

The US dollar has received a boost from several Fed speakers, which have talked up tapering. In the view of economists at ING, Asian markets are expected to pull back on Thursday as investors react to relatively more hawkish commentary from Fed officials. 

USD/THB remains on track towards the 35.00 level

“July consumer price data should show inflation drifting below the Bank of Thailand’s 1% to 3% policy target. Significant demand slack in the economy suggests that inflation isn’t going to be a problem in Thailand for the foreseeable future. In a drastic downgrade, the BoT cut its growth outlook for this year from 1.8% to 0.7% whilst leaving monetary policy on hold. We remain of the view that BoT policy has nowhere to go until after 2022. The USD/THB rate remains on track towards our 35.00 forecast for end-2021.”

“The power struggle continues in Malaysia. Prime Minister Muhyiddin Yassin persists with his defiance of calls by opposition parties to step down. The USD/MYR has been steady around 4.22 over the last few trading sessions, though we believe there is worse to come for this currency. Our end-2021 USD/MYR forecast remains at 4.40.”

“Despite a possible uptick in inflation, we believe Bangko Sentral ng Pilipinas (BSP) will keep rates unchanged for the balance of 2021 given repeated comments by Governor Diokno on the need to provide monetary policy support.”

“The Indonesian economy was showing some modest improvements in activity. But we expect much of this momentum to quickly fade in 3Q with the authorities implementing strict mobility curbs to combat a surge in Covid cases. With growth momentum fading, we expect Bank Indonesia (BI) to reiterate its ‘pro-growth’ stance and keep rates unchanged throughout the year.”