Most Asian currencies traded in tight ranges on Monday, tracking movements in the US dollar ahead of the Federal Reserves' policy meeting this week, where it is widely expected to raise interest rates. A Reuters poll showed that while markets have priced in a 25-basis point rise in rates, investors' will be looking for any fresh hints on the pace of further tightening and for details on its plans for trimming its balance sheet. Mixed US economic data and lower inflation expectations have created a division of opinion.
"The market will be more focused on the dot plot and whether or not it will show a more gradual rate hike trajectory, and if that's the case, then it will be more positive for Asian currencies appetite post Fed," said Chang Wei Liang, FX strategist at Mizuho Bank.
Markets will also be looking out for any guidance on the vanishing normalisation policy from the FOMC meeting, Chang added, saying that at the moment, the Asian currency markets are in a wait-and-see mode.
The Fed concludes its two-day meeting on Wednesday, and the outcome will affect trade in early Asia on Thursday. The dollar had risen against a basket of currencies on Friday, helped by a sharp drop in the British pound after surprise results of the UK parliamentary elections. On Monday, though, sterling gained, buoyed by Prime Minister Theresa May's efforts to unite her party.
Among regional currencies, the South Korean won was 0.2 percent lower, after South Korea's central bank chief said on Monday that the bank will maintain its current record-low interest rate of 1.25 percent as uncertainties remain high and as inflationary pressure is weak.
Meanwhile, the Taiwan dollar was on track to post its fifth straight session of losses on Monday, down 0.1 percent. The Taiwan economy, which is dependent on tech exports to the United States, took a beating with the local semiconductor index falling 1.8 percent, as US tech stocks tumbled on Friday. But analysts say it doesn't reflect any fundamental shift in terms of demand for tech products and, therefore, any spillover on Asian currencies isn't going to be large and will probably be transitory.
Philippine and Malaysia markets were closed for local holidays. The Indian rupee was 0.1 percent lower ahead of consumer price inflation (CPI) data for May, scheduled for later in the day. Inflation in India is expected to have cooled to a record low in May, a Reuters poll showed, which could add pressure on the Reserve Bank of India to cut interest rates later in the year.
Mizuho Bank said in a note that weak May CPI data could set off rupee strength amid buying in bonds driven by bets on imminent easing. The Singapore dollar was up 0.1 percent, but was not seen to be affected by data showing retail sales growth at 9-month highs. Singapore's retail sales in April rose 2.6 percent from a year earlier, data from the Singapore Department of Statistics, showed on Monday, its best growth since July 2016.
Analysts said the data would not likely have any implications on the central bank's policy stance. In April, the Monetary Authority of Singapore warned of "significant policy uncertainty" globally, signalling a reluctance to tighten anytime soon.