Most Asian currencies weakened against a strong dollar on Monday, even though indications of an easing US labour market reaffirmed expectations of a pause in rate hikes by the Federal Reserve.
The Indian rupee depreciated by 0.22% to its lowest level in over a week, while the South Korean won weakened as much as 0.41%, set for its worst day in nearly two weeks.
In the United States, the Fed is expected to pause in interest rate hikes at its June 13-14 meeting after last week’s data highlighted wage pressures had started to ease and the unemployment rate climbed off a 53-year low.
However, Moh Siong Sim, a foreign exchange strategist at the Bank of Singapore suggested that the Fed might reengage in further policy tightening after the June meeting as prospects of an economic rebound in the US may be relatively resilient in the long run.
“I think there may be a bit more room for dollar strength in the near term, as we are seeing some stabilization in the regional banking sector and also because growth outside of the US has been somewhat disappointing,” he said.
The US dollar recouped some of its losses from the previous session, with the dollar index trading at 104.15 by 0455 GMT, a jump from Friday’s last close of 104.03.
Markets will be closely watching monthly trade numbers, factory orders, ISM non-manufacturing, and weekly jobless claims data in the US throughout the week for further cues.
In Southeast Asia, the Singapore dollar weakened 0.1% while the Indonesian rupiah, the only bright spot, strengthened 0.7%, on track for its best day in nearly five weeks.
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Turkiye lira weakened more than 1% in a shaky initial reaction to the appointment of highly-regarded Mehmet Simsek as finance minister.
Most equities markets in the region enjoyed an extended rally on easing interest rate jitters; shares in South Korea , Taiwan, and the Philippines rose between 0.2% and 0.6%.
Stocks in Jakarta marginally rose by 0.1%, but Indonesian tech firm gave up as much as 14.97%, on track for its biggest-ever one-day decline.