US Fed rate hike will intensify market risks for Asia’s central banks

The expected 75-basis-points interest rate increase from the Federal Reserve this week will heap pressure on its Asian counterparts to speed up monetary tightening — or risk further fund outflows and weaker currencies.

An analysis of policy rates in Asia Pacific versus their five-year averages shows a high degree of vulnerability across the region, as does an examination of interest rates adjusted for inflation, and yield spreads versus US Treasuries.

The level of threat varies considerably, with the most danger for markets like Thailand, where the central bank has kept rates at a record low. South Korea and New Zealand, which moved early to front load hikes, are better placed but not immune to trouble.

Recent tightening announcements from…