Investors are keenly awaiting a flurry of economic data this week, including central banks’ monetary policy meetings in Korea and Indonesia on Thursday
Asian equity markets declined on Monday, and the Malaysian ringgit and Indonesian rupiah led currency declines against the safe-haven greenback as investors exercised caution amid the potential escalation of the Middle-East conflict.
The ringgit reached its lowest level since November 2022, dropping 0.3% by 0357 GMT. The rupiah followed suit to shed 0.2%, while the Philippines peso touched its lowest in nearly a week.
Equities in Southeast Asia were lower, with markets in Jakarta and Kuala Lumpur shedding around 0.4% each.
Malaysia said last week it intended to introduce a capital gains tax (CGT) and a tax on high-value goods and gradually cut subsidies to aid recovery in the country’s fiscal position, as a slowdown in the economy strained government spending.
Elsewhere, the U.S. dollar sat near a one-week high against a basket of currencies as risk sentiment remained fragile amid the Middle-East war, which has shed light on growing geopolitical risks for financial markets.
Market participants were looking forward to a speech by Fe Chair Jerome Powell on Thursday for further hints on the U.S. central bank’s rate outlook.
The Israeli shekel dropped to more than an eight-year low of 3.9900 per dollar in early Asia trade.
Asia FX will inevitably be on the back foot under these conditions, particularly if the double whammy of higher oil prices and stronger US dollar take any shine out of softer yields, said Vishnu Varathan, head of economics & strategy at Mizuho.
Investors are keenly awaiting a flurry of economic data this week, including central banks’ monetary policy meetings in Korea and Indonesia on Thursday.
The focus remains on China, Southeast Asia’s biggest trading partner, which will release data points including GDP, retail sales and industrial production on Wednesday.
China’s central bank stepped up liquidity support to the banking system as it rolled over medium-term policy loans on Monday, but kept the interest rate unchanged.
Chinese yuan depreciated by 0.1%, while mainland stocks lost more than 0.4%. CNH (yuan) downside risks remain intact amid uncertainty premium on both ends with US dollar strengthened by geopolitics and CNH affected by prospects of a durable growth boost, Varathan added.
In South Korea, the won lost more than 0.3%, with the currency marking its lowest level since October 4.
Shares in South Korea shed over 1%, while those in Thailand pulled back 2.4% to mark the lowest level since December 2020. The Thai benchmark is on track for its largest single-day percentage decline since March 14.