Asian currencies retreat after hot US inflation, South Korean stocks slip 8%

Emerging Asian currencies slipped on Thursday following hotter-than-anticipated US inflation, which heightened expectations of a Federal Reserve rate increase and unsettled AI-related stocks globally due to higher borrowing costs. The South Korean won plummeted over 1%, reaching a two-week low of 1,352.84 per dollar, while the Taiwan dollar tumbled to 32.325, its weakest level since early August.

South Korean stocks, specifically chipmakers Samsung Electronics and SK Hynix, suffered a steep decline, erasing nearly 10% and 12% of their value respectively, marking their worst day since late July. Taiwan stocks also slumped by 3.8% to near a one-month low, with Taiwan Semiconductor Manufacturing (TSMC) shedding almost 3%. Financial market strategist Inki Cho suggested the won's decline was more likely due to technical adjustments than a shift in trend, while the dollar's slide indicated foreign investors extended their selling spree in Taiwanese equities.

Meanwhile, in Southeast Asia, the Philippine peso hit a record low of 63.09 per dollar, driven by elevated oil prices, El Niño risks on food costs, high inflation, and weak growth, coupled with a deteriorating current account position. Goldman Sachs analysts predicted further peso weakness and called for two additional rate hikes by the Bangko Sentral ng Pilipinas, with the first expected shortly.

The US consumer prices soared faster than expected last month, prompting expectations of further Fed rate hikes, potentially as early as this month. A surge in the US dollar index, indicating the greenback's strength against a basket of currencies, was seen following the inflation data, but it lost most of those gains after Federal Reserve officials' cautious remarks.

Indonesia's rupiah weakened to 17,955 per dollar, while Singapore stocks tumbled around 1% to a three-month low, with major lenders DBS Group and OCBC each slipping about 1%. The Indian rupee showed a slight uptick, settling at 94.885 at market open, as traders speculated the central bank would continue selling dollars via state-run banks to bolster the currency.