MANILA (Reuters): Most emerging Asian currencies gave up gains on Tuesday, while regional equities rose more modestly after the previous session's sharp rally, as a lack of details on a preliminary deal to end the Iran war tempered investor optimism.
The Philippine peso ended a six-session winning streak, easing to 60.458 per dollar, while the Malaysian ringgit weakened to 4.063 after gaining for three consecutive sessions.
The South Korean won appreciated slightly to 1,507.5 per dollar in its third straight session of gains.
Early optimism over the U.S.-Iran memorandum of understanding aimed at ending the war was replaced by caution, with investors focusing on the lack of publicly released details and the absence of a permanent truce.
Oil prices slipped after rising earlier, as markets weighed prospects for a resumption of supply through the key Strait of Hormuz against shaky physical market drivers.
Analysts at HSBC expressed concerns over the durability of an Asian asset rebound, remaining unclear on whether energy prices would fall sufficiently in the near future. They were also wary of inflation in much of the emerging Asia region.
"The risk that lingers is implementation as mine clearance logistics and the backlog of vessels in transit mean normalisation of energy flows could take months even if the MoU holds," said Billy Leung, investment strategist at Global X ETFs Australia.
Emerging Asian stock markets posted slight gains, with South Korean equities closing up 2.1% after Monday's 5.2% jump.
Taiwan shares reversed early losses to close up 0.9%. Malaysian equities rose 0.9%, while those in the Philippines reversed gains to slip 0.4%.
Markets in Indonesia were closed for a holiday. Attention now turns to several central bank meetings this week, including Wednesday's U.S. Federal Reserve decision - the first under newly appointed Chair Kevin Warsh.
Among regional central banks, analysts expect Bank Indonesia and Bangko Sentral ng Pilipinas to maintain their hawkish tilt.
A Reuters poll of economists showed expectations of the Philippine central bank raising its key interest rate for a second consecutive meeting on Thursday and delivering a further 50 basis points of tightening by year-end.
The two central banks meeting later this week would likely welcome the U.S.-Iran breakthrough and limit any rate hikes to 25 basis points to support their currencies, analysts at DBS said in a note.
Markets also expect Taiwan's central bank to hold its policy interest rate steady this week and keep it in place into 2027, according to economists polled by Reuters.
