BENGALURU: The South Korean won and the Malaysian ringgit led gains in Asian currencies on Monday, with stocks mixed in lacklustre trading, as investors remained on the backfoot ahead of a key monetary policy decision by the Federal Reserve and other central banks.
The won added 0.4% on gains from local technology stocks and on expectations of local exporters selling dollars at the month-end, according to Saktiandi Supaat, head of FX research at Maybank.
South Korea’s benchmark index gained 0.3%. The ringgit firmed 0.3%, with Malaysian stocks down 0.3%.
“The ringgit’s rise is based on expectations of some effort by Bank Negara Malaysia (BNM) to support the currency building into positioning for the week,” Maybank’s Supaat said.
BNM will decide its overnight policy rate on Nov. 2, with Supaat expecting no change in current interest rates. Nevertheless, a hike in Malaysian interest rates would be akin to the rate-tightening policy followed by Bank Indonesia (BI) and Bangko Sentral ng Pilipinas (BSP) in the past two weeks.
Analysts at BofA Global Research said in a note that BSP’s surprising hike on Oct. 19, which was mainly aimed at maintaining the rupiah’s stability, “would not be a harbinger for further tightening in the region.”
The Indonesian rupiah, which fell for eight consecutive weeks, traded up 0.3% on Monday. Indonesian shares fell 0.5%.
“In our base case of no recession in the US, we expect most Asian central banks to stay on hold in the rest of 2023, except the Reserve Bank of India (RBI) which could deliver a 25-basis point hike in December,” BofA analysts added.
Meanwhile, the Singapore central bank said inflationary pressures will ease and economic growth will gradually improve next year. The city-state had been on the verge of a technical recession in mid-2023. The Singaporean dollar added 0.2%.
Emerging Asian markets remained on the edge ahead of a series of central bank policy meetings during the week, including in the United States, Britain and Japan.
Markets expect the US Federal Reserve to leave rates unchanged at its policy meeting ending on Nov. 1. Analysts at BofA said the Asian central banks were now better prepared to mitigate the impact of higher US rates and stronger greenback.
Traders also eyed a slew of economic data this week, including inflation in Indonesia, industrial output in South Korea and manufacturing PMI in China, India and the Philippines.
Indian equities were down 0.4%. Markets in the Philippines were closed on account of a public holiday.
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