Many Asian stock exchanges deepened their losses on Thursday as currencies tanked after the US Federal Reserve delivered a third consecutive 75-basis-point interest rate cut overnight and signalled more to come through next year, sparking fears of recession.
The baht fell as much as 0.6% to 37.38 to the US dollar yesterday, the lowest since October 2006, as the greenback also notched new highs against regional currencies such as the yen, won, yuan, Singapore dollar and Australian and New Zealand dollars.
The Thai currency has weakened almost 11% this year, with the losses coming mostly since the start of the Ukraine war.
The Stock Exchange of Thailand, however, managed to finish higher thanks to significant purchases of tech, banking and automotive shares, compared with drops of Hong Kong's Hang Seng Index, the Shanghai Composite, the Nikkei 225 and South Korea's Kospi.
The decline happened after the US lifted interest rates by 0.75% to 3.00-3.25%, the highest level since 2008, prompting losses on Wall Street's benchmark S&P 500 index, the Nasdaq Composite and US futures.
US policymakers, criticised for being too late to realise the scale of the US inflation problem, also forecast a further 1.25 percentage points of tightening before the year-end as they are moving aggressively to catch up.
They projected interest rates reaching 4.4% this year and 4.6% in 2023, before moderating to 3.9% in 2024.
Chairman Jerome Powell vowed the Fed "would crush inflation" and officials were "strongly resolved" to bring it down to the 2% goal. He said "we will keep at it until the job is done".
Mr Powell also indicated a recession might be the price to pay for tamping down inflation.
"No one knows whether this process will lead to a recession or if so, how significant that recession would be," he said at his post-meeting press conference.
A soft landing with only a small increase in joblessness would be "very challenging", according to Mr Powell.
At the meeting the Fed's board forecast the US economy will grow just 0.2% this year, down from 1.7% expected in March.
The median forecast among the 19 Fed officials is for unemployment to reach 4.4% next year and stay there through 2024, from the current 3.7%.
Sentiment took an additional hit from Russia's escalation of its war with Ukraine and tensions between China and Taiwan.
Central banks in Asia followed suit, with Hong Kong's Monetary Authority yesterday raising its base rate charged through the overnight discount window by 75 basis points to 3.5%, the highest level since 2008.
In the Philippines, the rate was lifted by 50 basis points to 4.25%, the highest since August 2019, while Bank Indonesia hiked its policy rate for the second consecutive month, also by 50 basis points to 4.25%.
Meanwhile, the Japanese government and the Bank of Japan intervened to buy yen and sell dollars for the first time in 24 years, Masato Kanda, Japan's vice-finance minister for international affairs, confirmed yesterday, as the central bank stuck to its ultra-loose monetary policy.
The yen weakened past 145 to the dollar, a 24-year low, as Bank of Japan governor Haruhiko Kuroda made bearish remarks that indicated he had no intention of raising rates any time soon.
In Thailand, analysts expected the central bank would increase the policy rate by 0.25% to 0.75% at the next meeting to follow the direction of global interest rates.
"There is a chance the Monetary Policy Committee meeting on Sept 28 will raise the rate by 0.25% to 1.00% after the first increase in almost four years on Aug 10 by 0.25% to 0.75%," said an analyst from CGS-CIMB Securities.
