Most Asian currencies weakened on Monday after the dollar took heart from strong US jobs data that tempered expectations for a rate cut from the Federal Reserve. Friday's strong US jobs numbers for June reduced hopes for a Fed rate cut, and investors are looking ahead to the Fed chairman's testimony to Congress this week for clues on policy direction.
The Korean won was the weakest Asian currency with a 0.8% decline. Adding to the won's woes was a trade skirmish with Japan, which has tightened export curbs on key materials used by South Korean makers of chips and smartphone displays.
Thailand's baht receded 0.6% against the dollar, cooling down from a recent rally as weak economic growth reinforced calls for a central bank rate cut. Thailand's central bank is not happy with hot money flowing into the country and has sometimes taken action on excessive moves in the baht, the governor said on Monday.
The baht remains Asia's best performer thanks to a weak dollar, foreign fund inflows and the country's large current account surplus.
Malaysia's ringgit traded 0.2% lower ahead of its central bank rate decision on Tuesday. The bank is expected to keep its powder dry after cutting rates by 25 basis points in May.
Taiwan's dollar weakened 0.3% as the economy grapples with slowing growth in China, Taiwan's biggest trade partner.
India's rupee was 0.3% lower after having rallied for ten straight sessions. In its budget released on Friday, the government raised import tariffs and proposed easing foreign investment norms in a bid to kickstart the economy.
India's fiscal deficit target for 2019/20 surprised at 3.3% of gross domestic product (GDP). A Reuters poll had projected up to 3.5% for the current fiscal year.
"Going ahead we expect this fiscal conservatism and swirling RBI (Reserve Bank Of India) rate cut expectations to undergird demand for Indian govies (government bonds)," OCBC said in a note. "Expect the INR to be one of the more resilient currencies in the face of any bouts of USD strength," it added.