Fed Surprise May Herald New Era of Asian Currency Weakness
- Korean won leads declines in region Thursday, falling over 1%
- Prospects of carry trade are somewhat challenged, Citi says
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A hawkish surprise from the Federal Reserve is exacerbating declines in emerging Asia currencies, potentially heralding a longer bout of weakness.
Almost all developing Asian currencies were lower against the greenback after the Fed released forecasts that showed officials anticipate two interest-rate increases by the end of 2023, sooner than many thought. The South Korean won fell as much as 1.5% to pace declines in the region while the Chinese yuan, Indian rupee and Indonesian rupiah each dropped at least 0.5%.