Asian central bank dilemma for 'hawkish' Fed...Shall we defend the currency?

Asian central banks have faced difficult decisions as the U.S. central bank, the Federal Reserve, has taken a hawkish stance on next year's interest rate stance, Bloomberg News has diagnosed.

He pointed out that he faced a difficult choice whether to fight back or watch the currency depreciate as he came at a heavy cost against the dollar's strength.

In its recently released revised economic outlook, the Fed presented the median forecast for next year's benchmark interest rate at 3.9%, raising it by 0.5 percentage points from its forecast (3.4%) in September.

Asian currencies weakened all at once, with signs that inflation concerns are back on the Fed's agenda.

The Indian rupee fell 0.14% against the dollar at one point this afternoon to a record low, according to a Bloomberg tally.

The Chinese yuan was down 0.17%, while the Bloomberg Asian dollar index was down 0.4%.

Bloomberg predicted such a move would raise questions again about how far the Asian central bank is willing to go to defend its currency, and to what extent such efforts would affect it."It's hard to fight a move to strengthen the dollar against the Asian currency, mainly driven by the dollar, which means the Asian central bank should try to ease downward pressure on the currency," said strategist Wikun Kong of

BNYMelon.

The People's Bank of China earlier today announced the dollar-yuan trading benchmark exchange rate at 7.1999 yuan, up 0.04%, a level to support the yuan, Bloomberg said.

Meanwhile, the yen/dollar exchange rate rose 0.23% to 155 yen again in more than a month as the central bank of Japan froze its key interest rate from the current 0.25%.