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MOST Asian currencies struggled for direction on Monday, with the Indian rupee leading losses, after hawkish comments from the U.S. Federal Reserve last week set the stage for further rate hikes and bolstered the greenback.
The Indian rupee slipped as much as 0.3%, poised for its worst day since Sept. 5, if trend holds.
The rupee had strengthened last week following JPMorgan’s decision to include India in its flagship emerging market index, but failed to sustain the rally amid pressure from the greenback and elevated U.S. yields.
Analysts at Barclays project the Reserve Bank of India will have little reason to change the current policy settings when the central bank meets next week to discuss monetary policy.
“We expect the MPC (monetary policy committee) to keep the repo rate unchanged at 6.5%, flagging waning core inflation, steady economic activity, and some risks of more supply-related price shocks, providing little cues for a change in policy thinking.”
The Philippine peso appreciated 0.1% while the South Korean won firmed as much as 0.5%, poised for its best session in more than a week, if gains hold.
The U.S. dollar index, which scaled a six-month high in the previous session, remained largely flat on Monday as the latest U.S. business activity data highlighted resilience in the world’s largest economy.
The Singapore dollar extended losses to depreciate 0.2% after data showed the country’s key consumer price gauge eased on a sequential basis due to lower inflation for services, food, retail, and other goods.
“Alongside the recent decision from the Fed to keep rates on hold, these factors may allow the Monetary Authority of Singapore to further extend its pause on monetary policy tightening at its October meeting while keeping watch on ongoing economic risks,” Yeap Jun Rong, Market Analyst at IG said.
Among other currencies in the region, Thailand’s baht and the Indonesian rupiah eased 0.2% each.
The recent jump in crude oil prices heightened concerns over a narrowing current account surplus in net importers such as Thailand and India, and could fan inflationary pressures.
Investor focus is also on the Bank of Thailand’s interest rate decision due on Wednesday.
The central bank is widely expected to leave its key policy rate unchanged at 2.25%, marking an end to a year-long tightening cycle, according to a Reuters poll of analysts.
Stocks in emerging Asia were largely mixed, with those in Thailand and South Korea slipping more than 0.5% each.
While shares in Singapore and the Philippines advanced 0.4% and 0.6%, respectively.
China stocks fell 0.4%, badgered by heavy losses in the real estate sector after China Evergrande plunged 24% as the embattled developer was unable to issue new debt due to an investigation into one of its units.
HIGHLIGHTS:
** Singapore Aug core inflation rises 3.4%, seen easing
** Bank Of Japan chief warns of highly uncertain wage, price outlook
** Indonesia coal production to start declining in 2030 – official – Reuters
