The South Korean won slipped as much as 0.3% on Monday to its lowest in nearly two weeks, while concerns over Omicron and inflation also kept most Southeast Asian currencies subdued on the first trading day of the year.
The Malaysian ringgit, Singapore dollar and the Indonesian rupiah weakened about 0.2%.
With inflation worries building, investors in risk-sensitive Asian markets will keep a close eye on how the US Federal Reserve plans to taper monetary stimulus, especially in light of the spreading Omicron variant of the coronavirus.
Asian central banks will want to keep interest rates low to offset the impact on their economies from a surge in local COVID-19 infections, without leaving their currencies vulnerable to excessive dollar strength as the Fed begins to withdraw stimulus.
"The spread of Omicron has put a near-term dampener on the growth recovery within the EM Asia region, especially with social restrictions being re-introduced in some countries," analysts at Mizuho Bank said in a note.
"The policy dilemma for EM Asia will worsen as fiscal policy despite its stretched bandwidth remains the mainstay for growth support, while monetary policy is caught in divergent tides of an even slower domestic economic recovery and tighter monetary policy from the Fed."
In Asia, South Korea's won eased to 1,193.0 per dollar, while shares jumped more than 1% supported by strong exports data.
In the Philippines, shares fell about 0.8% to their lowest in one month, after the government said late on Friday that it will impose tighter curbs in the capital region over the coming two weeks to limit Omicron infections.
The Malaysian share market benchmark declined by up to 1.4% due to floods in seven states, while Indonesian shares advanced as much as 0.9% to their highest since mid-December.
Meanwhile, Singapore shares advanced about half a percent as data showed the city-state's economy expanded at its fastest annual pace in over a decade in 2021, showing signs that a recovery is underway after the worst recession on record.
Singapore, a financial and transport hub and often seen as a bellwether of global growth, is expected to continue to grow in the coming year. However, spread of the Omicron variant of coronavirus could impede growth if restrictions are imposed.
Markets in Thailand,, China, and Japan were closed for a holiday.
HIGHLIGHTS:
** Indonesian 10-year benchmark yields edged lower to 6.369%
** Shares of Indonesia coal miners drop as export ban rattles sector
** India's daily COVID-19 cases highest since Sept. 18, 2021
Reuters
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