EMERGING MARKETS-Asian FX retreats on hawkish Fed, awaits c.bank meetings

* BOJ keeps ultra-low interest rates, yen weakens further * Philippine peso hits record low * C.bank meetings in Indonesia, Philippines and Taiwan imminent By Riya Sharma, Sept 22 (Reuters) – Asian currencies fell on Thursday, after the US Federal Reserve gave a hawkish outlook for interest rates and ahead of several key central bank meetings later in the day, including in the Philippines where the peso hit a record low. Stocks in Asia also hit two-year lows after the US Federal Reserve announced its third straight rate hike of 75 basis points on Wednesday and announced further rate hikes, underscoring its determination not to let up in its fight against inflation. Bank Indonesia (BI) is expected to hike interest rates by another 25 basis points at its meeting later in the day, a Reuters poll of economists showed. BI unexpectedly hiked interest rates in August for the first time since 2018 and began tightening to combat rising inflation, though it’s still moving more slowly than most of its regional peers. The rupiah hit its lowest level in more than two years, falling 0.3%, while shares in Jakarta were flat. The Philippine central bank is also likely to opt for a half-point rate hike at Thursday’s meeting to support a flagging currency and mitigate the impact of imported inflation, a Reuters poll of economists showed. The peso slipped 0.7% to a record low, while Manila stocks fell 1.8% to their lowest level in more than a month. The Bank of Japan remained an outlier amid a global wave of central banks withdrawing stimulus to fight inflation as it stuck to ultra-low interest rates and dovish policy guidance at a monetary policy meeting on Thursday. The yen, which has fallen more than 20% against the greenback so far this year, fell 0.9% to a 24-year low. Federal Reserve officials signaled borrowing costs would continue to rise this year, forecasting rates of 4.4% this year, higher than markets had priced in before the meeting and 100 basis points higher than the Fed forecast three months ago . The US dollar rose to a two-decade high against its key peers, buoyed by the Fed’s dovish outlook and as the US bond yield curve continued to invert. “The 2-year yield already ahead of the Fed’s benchmark rate and some safe-haven flows amid geopolitics may have been factors that prevented the yield from being more responsive to the FOMC outcome earlier,” said Frances Cheung, rates strategist at OCBC Bank, in a note. Higher yields strengthen the dollar, increase the attractiveness of Treasury bills and the greenback, and in turn weigh on riskier Asian assets. “More aggressive rate hikes will continue to hamper growth while keeping inflation expectations on hold; such an inflation-growth matrix will limit the upside potential of the 10-year yield, at least in the short term,” Cheung said. Investors in Asia are also awaiting a policy decision from Taiwan’s central bank later on Thursday, with a modest rate hike expected, according to economists polled by Reuters. The island’s economic growth, exports and inflation are all slowing down. The Taiwan dollar fell 0.5% to its lowest level in three years, while shares on the Taiwan Stock Exchange fell 1.9% to its lowest level in more than two months. HIGHLIGHTS: ** Indonesian benchmark 10-year yields up 2.6 basis points to 7.221% ** Singapore benchmark 10-year yields up 1,400 basis points to 3.204% Asian equity indices and currencies at 0527 GMT LAND FX RIC FX DAILY % FX YTD % INDEX STOCK DAILY % STOCK YTD % Japan -0.52 -20.52 -0.54 -5.64 China -0.58 -10.35 -0.29 -14.61 India -0.76 -7.76 -0.53 1.56 Indonesia -0.18 -5.14 0.20 9.44 Malaysia -0.38 -8.83 -0.41 -8.06 Philippines -0.68 -12 .69 -1.49 -12.29 South Korea -0.98 -15.57 -0.77 -21.78 Singapore -0.20 -4.99 -0.23 4.18 Taiwan -0.48 -12 .35 -1.11 -21.71 Thailand -0.56 -10.66 0.17 -1.29 (Reporting by Riya Sharma in Bengaluru; Editing by Edmund Klamann)

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