BENGALURU: Most emerging Asian equities were in the negative territory on Tuesday, while regional currencies were steady, as investors fretted over the US Federal Reserve’s 2026 monetary policy path.
The MSCI index of emerging Asia equities fell 0.7 percent, its biggest one-day drop in more than two weeks. MSCI’s gauge of emerging market currencies was flat.
Markets are pricing in a more than 86 percent chance of a 25-basis-point Fed rate cut on Wednesday, putting the spotlight squarely on the central bank’s guidance for next year and on who might replace Jerome Powell when his term as chair ends in May.
“The risk is that markets may be overly dovish in terms of 2026 projection and it is highly plausible that the Fed fails to outdove expectations,” said Christopher Wong, FX and rates strategist at OCBC.
“A hawkish-cut outcome may pose upward risks for USD and weigh on risk proxies and Asian FX,” Wong said, adding that some investors have been trimming positions ahead of the decision.
Equities in Malaysia and Indonesia were down 0.3 percent and 0.7 percent, respectively, while the ringgit slipped 0.2 percent. The rupiah, on the other hand, inched up 0.2 percent.
Meanwhile, stocks in the Philippines reversed earlier losses to gain 0.5 percent, while the Philippine peso edged 0.1 percent lower.
A Reuters poll of economists expects the Bangko Sentral ng Pilipinas (BSP) to cut its key rate by 25 basis points on Thursday amid weak growth and easing inflation. They also expect at least one more reduction early next year.
“A BSP cut on Thursday is likely to add mild pressure on the peso, which is already one of Asia’s weaker performers this quarter,” said Glenn Yin, director of research at ACCM.
“Philippine equities may also see cautious foreign flows, as investors often hesitate to add exposure when the currency outlook is soft.”
Elsewhere, South Korean stocks fell 0.3 percent, dragged lower by chipmakers Samsung Electronics and SK Hynix.
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