BENGALURU: Most Asian currencies and equities eased on Wednesday after a recent rally, as investors exercised caution around their expectations of a potential end to US rate hikes after minutes of the Federal Reserve’s last meeting.
Leading losses, the Indonesian rupiah dropped more than 1% to mark its biggest single-day decline since Sept. 28. The Malaysian ringgit followed suit to depreciate as much as 0.6%.
The ringgit has lost more than 2% so far this month and is on track to post its first monthly fall in four, while the rupiah has also dropped nearly 2% and set to end a streak of four straight monthly gains.
“I think it is a retracement along a down-trend for Asia FX, given the consolidation in US 10-year yields. Going forward, the recovery for Asia FX is also likely to be a non-linear process,” said Nicholas Chia, macro strategist at Standard Chartered.
Indonesia’s central bank on Tuesday sold $236.5 million worth of new securities denominated in US dollars, higher than its target of $200 million, in a move aimed at attracting capital inflows.
“On Indonesian rupiah, the global risk appetite remains intact, evidenced by the over-subscribed SVBI auction yesterday ... today’s slump suggest it is likely idiosyncratic factors relating to onshore dollar demand that is causing the IDR weakness,” Chia added.
Volumes are likely to be low through the rest of the week, with Thursday’s Thanksgiving holiday in the US
Fed’s minutes from its last meeting, however, did little to dislodge expectations that its rate-hike cycle was over. Though, Fed officials reiterated they would only hike rates if progress in controlling inflation faltered.
The dollar index, on the other hand, stabilized with a marginal gain of 0.2% by 0711 GMT, though it held around 2-1/2-month lows.
Back in Asia, Singapore’s economy grew faster than initial estimates in the third quarter, helped by a resurgence in tourism and service sector activity, although authorities warned of risks to the outlook from inflation and geopolitics.
“Our base case remains for the MAS (Monetary Authority of Singapore) – which will now meet in January, April, July and October every year – to leave its FX policy settings unchanged through 2025,” analysts at Barclays said in a note.
Equities in Southeast Asia traded mixed, with shares in Philippines and South Korea adding 0.7% and 0.1%, respectively. Shares in Thailand, Indonesia and Malaysia retreated between 0.5% and 1%.
In Argentina, the black-market peso plummeted, while its equities and bonds surged on Tuesday as local markets reopened for the first session after President-elect Javier Milei’s win.
The Taiwanese dollar further dipped 0.4%, snapping a seven-day rally, while equities lost 0.6%.
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