Emerging Asian stock markets and currencies fell on Thursday, as cautious investors stayed away from riskier assets, weighing the possibility of the U.S. involvement in the Israel-Iran conflict.
Iran and Israel traded further air attacks as U.S. President Donald Trump kept markets guessing on whether Washington would join Israel's strikes on Iranian nuclear facilities.
The Israeli shekel weakened 0.2%. The Malaysian ringgit weakened 0.4% to a near one-month low, and the South Korean won fell as much as 1%. The Vietnamese dong touched a record low against the dollar.
"Should the U.S. become involved in the Israel-Iran conflict, some sentiment deterioration would be warranted," analysts at DBS said.
Local investors also focused on the monetary policy decisions by the Philippine and Taiwan central banks due later in the day.
Taiwan's central bank is likely to maintain its policy rate, while Bangko Sentral ng Pilipinas (BSP) is expected to cut its key interest rate by 25 basis points, as slowing inflation allows it room to support the domestic economy amid weaker growth.
The Taiwan dollar weakened 0.1% and the Philippine peso fell 0.4% to a more than two-month low.
It is unlikely to be an easy decision for the BSP, considering peso's recent underperformance alongside rising oil prices, DBS said.
BSP would likely prioritise domestic factors such as inflation and incoming activity-based indicators, which may lay the ground for further rate cuts, it added.
In Thailand, political uncertainty weighed on sentiment as Prime Minister Paetongtarn Shinawatra's government was hanging by a thread, with coalition partners reconsidering their support after a major player's exit threatened to bring down the administration.
The Thai baht fell 0.6% to a near three-week low and equities dropped as much as 2.4% to their lowest since April 9.
Other stock markets also tumbled, with the MSCI index of Asian emerging market equities falling 1.3%.
Equities in Taiwan slipped 1.4% and those in Malaysia fell 0.6%. Indonesia stocks dropped 1.6% to a one-month low, a day after the country's central bank paused its easing cycle.
Bank Indonesia Governor Perry Warjiyo said the central bank remains open to further lowering borrowing costs, as inflation is expected to remain within target this year and next year.
The decision came just hours before the U.S. Federal Reserve held rates steady, as expected, and retained projections for two quarter-point rate cuts this year.
HIGHLIGHTS:
** Vietnam can borrow more from foreign lenders if needed, central bank says
** Brazil central bank raises rates, sees 'very prolonged' pause - Reuters
