Asian markets wavered on Monday, with the Malaysian ringgit and Indonesian rupiah dipping slightly and stocks trading lower as investors await rate decisions this week from local central banks and the U.S. Federal Reserve.
The rupiah weakened by 0.2% to breach the psychologically significant 16,000 per U.S. dollar threshold, potentially influencing Bank Indonesia's (BI) monetary policy decision on Dec. 18, where it is expected to maintain interest rates.
The rupiah has declined more than 6% from its September peak despite central bank intervention, and is now at the forefront of policymakers' concerns after four consecutive sessions of falls.
The ringgit extended its six-session decline, falling 0.3% to its lowest since Dec. 4, over pressure from expectations of higher headline inflation in Friday's data release.
While Bank Negara Malaysia is likely to maintain rates at its Jan. 22 meeting, the absence of an explicit inflation target could provide room for potential rate cuts in 2025 if economic growth significantly decelerates, analysts said.
The South Korean won initially rose 0.5% following President Yoon Suk Yeol's impeachment vote over the weekend, but later reversed course to fall 0.1% by 0323 GMT, reflecting political uncertainty.
"The won may strengthen towards 1,400 in Q1, offering importers a window for FX risk hedging," said Poon Panchibool, a markets strategist with Krung Thai Bank.
However, potential tariff hikes under the administration of incoming U.S. President Donald Trump could weaken the won, raising caution among investors, he said.
Globally, the U.S. dollar index hovered near a three-week high of 107.18, as investors anticipate the Fed's rate decision on Dec. 18 and potentially slower monetary easing in 2025, despite expectations of an initial cut.
The Bank of Thailand is widely expected to keep rates steady on Wednesday, while the Bangko Sentral ng Pilipinas is anticipated to implement a rate cut on Thursday, following a 25 basis points reduction in October.
The Thai baht and the Philippine peso largely traded flat. Most Asian equities were largely subdued on Monday, with those in Bangkok and Jakarta down nearly 1%. Shares in Mumbai and Manila dipped 0.4%.
Foreign investors are likely poised to capitalise on any correction in Indian assets, particularly equities, as a weaker rupee enhances their attractiveness, potentially driving the INR back to the 83.50 level by late 2024, Krung Thai Bank's Panchibool said.
HIGHLIGHTS:
** China's factory output up, but consumption still a drag
** Domestic, global headwinds challenge Indian central bank's fx intervention
** South Korea's foreign minister says to talk to Blinken - Reuters
