Emerging Markets - Asian assets fall ahead of US CPI data, Fed policy meeting

JAKARTA (Reuters): Emerging Asian markets fell on Tuesday ahead of the US inflation data and the Federal Reserve's policy meeting, which will provide further cues on future rate cuts. The Fed is widely expected to hold rates for the seventh consecutive meeting in its upcoming policy decision, due on Wednesday.

The US inflation numbers, due before the Fed decision, are expected to have risen by a slim 0.1% in May, but with the core figures up 0.3%.

"A much more hawkish adjustment of the dot plot to one cut may see USD strength persist for longer while risk proxies, including Asian FX may come under pressure," OCBC currency strategist Christopher Wong said.

However, a shift to two cuts would be of no surprise and the dollar may ease while risk proxies could enjoy a relief rally. In Asia, the market's attention was focused on Indonesia's rupiah, which weakened 0.1% on Tuesday, trading at its lowest level since April 2020.

Bank Indonesia's deputy chief said it will use all its monetary instruments to stabilise the rupiah. The central bank on Monday intervened to prevent extreme volatility in one of the region's worst-performing currencies this year.

Taiwan's dollar fell as much as 0.5% to 32.411 per US dollar. It was set for its biggest intraday loss in nearly eight weeks.

South Korea's won, one of the worst regional performers this year, also dipped 0.2%, while more other regional currencies were mostly trading flat.

Earlier in the session, China's yuan fell to a near seven-month low against the US dollar, as investors returned from a long weekend, catching up with the broad strength of the greenback in overseas markets.

Asian equities were largely mixed on Tuesday, with risk sentiment dented by the upcoming US policy meeting. Taiwanese stocks hit a record high in early morning trade, but pared back most gains later in the day.

The index closed down 0.3% at 21,792.12 points. Stocks in China and Singapore fell 0.5% and 0.4%, respectively, while those in South Korea and India each rose 0.2% and 0.3%.

In other emerging markets, the Mexican peso fell nearly 2% to 18.55 per U.S. dollar in international trading as President-elect Claudia Sheinbaum pledged to encourage discussions on proposed constitutional reforms, including a judicial overhaul. - Reuters

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Asian Assets , CPI Data , Falling


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