How do Fed rate hike expectations affect Asian currencies?

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Fed rate hike expectations generally weaken Asian currencies versus the US dollar

Fed rate hike expectations have continued to weigh on regional market sentiment, keeping the US dollar supported and leaving many Asian currencies weaker against it. In Malaysia, the ringgit ended lower against the US dollar, moving to 4.0920/0965 at 6 pm compared with 4.0825/0870 at the previous close. The same dynamic was described as operating broadly across Asia, even as crude oil prices fell.
What markets are focused on when the Fed hike outlook stays in place
When investors keep pricing in the possibility of further monetary tightening by the US Federal Reserve, they tend to favour the US dollar. In this environment, Asian currencies are generally weaker against the greenback because the Fed hike expectation continues to support the dollar’s strength. This was highlighted despite lower crude oil prices, which would otherwise be expected to reduce some external pressures on currencies.
How US data keeps the rate-hike view supported
Recent US labour-market signals were cited as a factor sustaining the Fed tightening narrative. The US Job Openings and Labor Turnover Survey (JOLTS) showed the number of job openings was higher than consensus estimates in May, reinforcing investor focus on the Fed. At the time of the report, markets were also set to watch the ADP Employment Change for June.
What this looks like in the ringgit’s moves versus the US dollar
The ringgit’s performance illustrated how the Fed-focused sentiment translated into currency pricing. It depreciated to 4.0920/0965 versus the US dollar at 6 pm from 4.0825/0870 at yesterday’s close. The report also described the ringgit as mostly lower versus a basket of major currencies at the close.
Mixed results versus regional currencies, even when the dollar is strong
While the broad pattern was weaker Asian currencies against the US dollar, the ringgit’s moves versus regional currencies were not uniform. It rose against the Thai baht to 12.2526/2708 from 12.2874/3084, and was marginally higher against the Philippine peso at 6.64/6.65 from 6.65/6.67. At the same time, it was slightly lower against the Singapore dollar at 3.1555/1589 from 3.1532/1570, and was flat against the Indonesian rupiah at 227.9/228.3.

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How do Fed rate hike expectations affect Asian currencies?

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