Thai baht gains on rate hike; tepid dollar lifts Asian FX

Thailand's baht and equities rose on Wednesday after the central bank raised its key interest rate by a quarter-point, while other regional markets climbed as the dollar dipped on hopes China loosens COVID-19 curbs that have fuelled slowdown fears.

Thailand's baht USDTHB strengthened 0.6% to 35.24 per dollar, eyeing its best month since March 1998, while stocks SET gained 0.3% and were set to add 1.6% in value this month.

"I expect the Thai baht to get a high that could be around 33.50 to 34.00 per U.S. dollar by the end of next year," Kittika Boonsrang, capital markets research specialist at Kasikornbank said.

Boonsrang added the forecast will only be achievable if the country's economy fights the contraction in exports and is able to welcome an increase in the inflow of tourists going forward.

Most other regional currencies strengthened against the U.S. dollar, which dipped as investors turned cautious ahead of comments from the U.S. Federal Reserve Chair Jerome Powell due later this session. Hopes of easing in China's COVID-19 policies further aided the sentiment.

Emerging markets have been sensitive to the U.S. rate outlook, as the Federal Reserve's aggressive monetary tightening this year has buoyed the dollar, putting pressure on local currencies.

Across the region, the Malaysian ringgit USDMYR and South Korea's won USDKRW emerged as top gainers to appreciate 0.9% and 0.6%, respectively, and both units were poised for their biggest monthly jump since March 2016.

The Indonesian rupiah USDIDR firmed 0.1%, ending a three-day losing streak, while stocks COMPOSITE added 0.8%. The currency is set to end the month 0.9% weaker.

Across the region, stocks were mostly trading in black - India NIFTY edged 0.3% higher, with Taiwan TAIEX and South Korean KOSPI shares advancing 1.2% and 1.6%, respectively.

HIGHLIGHTS:

** Indonesian 10-year benchmark yields slip marginally to 6.964%

** Thai factory output unexpectedly falls 3.71% y/y in Oct

** Markets in the Philippines are closed for a public holiday