Most emerging Asian currencies edged up and stock markets advanced on Tuesday as the US dollar retreated from a two-decade peak after a recovery in the euro.
The dollar index, which measures the greenback against a basket of six currencies, pulled back following investors raising their bets for a 75 basis-point (bps) hike by the European Central Bank.
That provided some respite to regional currencies, with Malaysia’s ringgit and Philippine peso rising 0.1% each, while Indonesia’s rupiah and India’s rupee appreciated 0.2% each.
“The US equity futures this morning revealed market sentiments taking a breather after the recent sell-off, which could drive some attempts to stabilise for the Asia session today as well,” said Yeap Jun Rong, market strategist at IG.
“That said, overall upside could remain limited with the lack of positive catalysts to cheer for now.”
One such catalyst could be this week’s US labour market report, which investors may use to gauge whether prospects of further interest rate hikes around the world are justified.
Thailand’s baht underperformed its peers and weakened for the third straight session. The tourism-reliant economy’s current account data for July is due on Wednesday.
Asia FX falls as Powell remarks buoy dollar; won, baht take beating
Poon Panichpibool, markets strategist at Krung Thai Bank, said the dollar was the most important factor presently affecting the baht, but that a larger-than-expected drop in Thailand’s trade balance could weaken the currency.
South Korea’s won firmed 0.2% after the Bank of Korea said its monetary policy stance would not change following Fed Chair Jerome Powell’s speech at the Jackson Hole conference last week.
The BOK, one of the first central banks to abandon pandemic-era monetary stimulus, raised its benchmark policy rate by 25 bps earlier this month after delivering an unprecedented 50 bps hike in July.
It has hiked rates by a total of two full percentage points since August last year.
Stock markets in the region were broadly higher, with Indonesia’s benchmark index snapping a three-day losing streak to advance 1.1%.
Equities in Seoul and Bangkok rose 0.9% and 0.6%, respectively.
Meanwhile, Manila’s benchmark index dropped 1.3% to snap three straight sessions of gains, with Acen Corp, Megaworld and JG Summit losing more than 3% each.
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