Asian FX pressured by dollar strength; ringgit, rupiah lead declines
Malaysian ringgit at near 6-week low
Stocks largely down, tracking Wall Street
Resurgent U.S. dollar hurt Asian FX
By Adwitiya Srivastava and Roushni Nair
Oct 22 (Reuters) -Asian currencies retreated on Tuesday, with the Indonesian rupiah and the Malaysian ringgit leading the decline, pressured by a resurgent U.S. dollar as investors anticipate a cautious approach on future rate cuts by the Federal Reserve.
The ringgit MYR= fell as much as 0.6% to 4.325 per U.S. dollar, its lowest level since Sept. 13. The rupiah IDR= followed suit to slip as much as 0.5%, hitting its lowest level since Oct. 15.
Among other currencies, the Philippine peso PHP= and Taiwanese dollar TWD= declined 0.3% and 0.2%, respectively.
Indonesia's newly minted leader, President Prabowo Subianto officially swore in his cabinet on Monday, including the reappointment of the country's highly-regarded Finance Minister Sri Mulyani Indrawati.
"There is no better Finance Minister to convince investors that fiscal discipline would be maintained within a new deficit ceiling, with the additional spending room allocated towards productive means," analysts at Maybank wrote.
Upbeat U.S. economic data and election polls favoring former President Trump have strengthened the dollar, signaling potentially higher interest rates for a longer duration.
The dollar index =USD which measures the U.S. currency versus six rivals was last at 103.96 in Asian hours, having touched its highest level of 104.02 since Aug. 1 on Monday.
As the odds of a Trump victory increase, there are indications that the 'Trump trade' has commenced in global financial markets, with negative short-term implications for emerging markets, analysts at BCA Research wrote.
"In short, the U.S. dollar will strengthen, and U.S. bond yields will rise in the lead-up to and after the election if Trump wins. In response, EM countries' currencies will depreciate, and their fixed-income and equity markets will suffer over the coming months."
In Asia, interest rates have been central theme with a slew of central banks announcingtheir monetary policies in the recent past, mostly in line with market expectations.
The Philippine central bank reduced its key interest rate by 25 basis points last week, while Bank Indonesia kept rates unchanged. Bank of Thailand, however, surprised markets with a 25-basis-point rate cut but indicated it was not the beginning of an easing cycle.
Investors are now awaiting the monetary policy statement from Bank Negara Malaysia (BNM) on Nov. 6 for its outlook on rates.
Stocks in the region were largely down, in line with overnight declines on Wall Street. South Korean stocks .KS11 dropped over 1%, while Taiwanese shares .TWII and Thailand's equities .SETI fell 0.4% and 0.3%, respectively.
Investors now look ahead to key inflation data from Singapore and Malaysia laterin the week.
HIGHLIGHTS:
** India, China reach pact to resolve border conflict, Indian foreign minister says
** Vietnam parliament elects army general as state president
Asian stocks and currencies as at 0330 GMT | ||||||
COUNTRY | FX RIC | FX DAILY % | FX YTD % | INDEX | STOCKS DAILY % | STOCKS YTD % |
Japan | JPY= | -0.09 | -6.56 | .N225 | -1.43 | 15.35 |
China | CNY=CFXS | -0.06 | -0.38 | .SSEC | 0.31 | 10.19 |
India | INR=IN | +0.00 | -1.03 | .NSEI | 0.00 | 14.03 |
Indonesia | IDR= | -0.42 | -1.03 | .JKSE | -0.27 | 6.58 |
Malaysia | MYR= | -0.53 | +6.18 | .KLSE | 0.00 | 13.13 |
Philippines | PHP= | -0.31 | -4.22 | .PSI | 0.31 | 15.18 |
S.Korea | KRW=KFTC | -0.10 | -6.68 | .KS11 | -1.06 | -2.93 |
Singapore | SGD= | +0.04 | +0.26 | .STI | -0.24 | 11.28 |
Taiwan | TWD=TP | -0.24 | -4.14 | .TWII | -0.42 | 30.75 |
Thailand | THB=TH | -0.09 | +1.95 | .SETI | -0.34 | 4.79 |
Reporting by Adwitiya Srivastava in Bengaluru; Editing by Lincoln Feast.
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