Asian currencies: Indonesian rupiah at lowest level in 4 years

BENGALURU: Emerging Asian markets were finely balanced on Tuesday as traders awaited the release of US inflation data and the Federal Reserve’s policy meeting, which are set to influence future rate expectations.

The Fed’s next policy decision comes on Wednesday, and is expected to result in policy rates remaining steady for the seventh consecutive meeting.

The US inflation figures for May, due before the Fed policy decision, are forecast to have risen by a slim 0.1% in May, but with the core up 0.3%.

“A much more hawkish adjustment of dot plot to 1 cut may see USD strength persist for longer while risk proxies, including Asian FX may come under pressure. But a shift to 2 cuts would be of no surprise and the USD may ease while risk proxies may enjoy a relief rally,” OCBC’s currency strategist Christopher Wong said.

In Asia, the market’s attention was fixed on the movement of Indonesia’s rupiah, which weakened by 0.1% on Tuesday, trading at its lowest level since April 2020.

Further declines in the currency are expected to prompt additional intervention from Bank Indonesia, which on Monday acted to prevent extreme volatility in one of the region’s worst-performing currencies this year.

Taiwan’s dollar fell as much as 0.5% to 32.411 per US dollar. It was set for its biggest intraday loss in nearly 8 weeks.

South Korea’s won, one of the worst regional performers this year, also dipped 0.1%, while more other regional currencies were mostly trading flat.

In China, the yuan fell to a near seven-month low against the US dollar, as investors returned from a long weekend, catching up with the broad strength of the greenback in overseas markets.

Asian equities were largely mixed on Tuesday, with risk sentiment dented by the upcoming US policy meeting.