BENGALURU: Most emerging Asian currencies were subdued and equities traded mixed on Tuesday, as escalating conflict in the Middle East and a repricing of US Federal Reserve rate cut bets drove investors to the safe-haven dollar.
The Chinese yuan led losses among currencies, slumping as much as 1.1% to 7.085 per dollar. The onshore currency started trade after a week-long holiday.
A stronger-than-expected key jobs report from the world’s largest economy last week erased hopes of another outsized 50-basis-point interest rate cut at the Fed’s November policy meeting and has kept the dollar firm.
Markets are no longer fully pricing in a 50-bps cut in November and are ascribing an 86% chance of a 25-bps reduction, the CME FedWatch tool showed.
At 0650 GMT, the dollar index, which measures the greenback against six major rivals, was at 102.39, nestled near its seven-week high.
That weighed on Asian currencies, with the South Korean won down 0.4%, and the Thai baht and the Taiwan dollar trading 0.3% lower. The Malaysian ringgit was down 0.2%.
Moreover, rising Brent crude prices due to the conflict in the Middle East also kept currencies of net oil importers from emerging Asia under check.
“Risk sentiment is generally poorer given tensions in the Middle East coming into focus,” Shaun Lim, an FX Strategist with Maybank said.
“In addition, China’s NDRC has largely disappointed with no new stimulus measures announced. Asian FX is also tentative on the back of this poorer risk sentiment.”
Asian equities were a mixed bag. Shares in Taipei and South Korea lost 0.4% and 0.6% respectively, while Singapore stocks were 0.3% down. Kuala Lumpur remained flat.
However, those in Mumbai and Jakarta rose 0.5% and 0.6%, respectively.
Regional investors will eye central bank decisions from South Korea and India later this week, where the former is expected to cut its key interest rate, while the Reserve Bank of India is likely to keep monetary policy unchanged.
Indonesia and the Philippines have already kick-started their rate-cutting cycles, with more Asian central banks expected to join in.
Elsewhere, Chinese stocks failed to sustain their blitzkrieg rally after markets reopened from a week-long public holiday, as Beijing fell short on delivering more details on its massive fiscal stimulus during a conference.
Shanghai shares had advanced as much as 10.1%, but pared most of their bumper gains to trade about 4% higher.
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