An employee counts Indonesian rupiah banknotes at a money changer's office in Jakarta on August 27, 2015. AFP PHOTO / ADEK BERRY
Emerging Asian currencies started the week on the back foot, with the Indonesian rupiah and Philippine peso leading losses on Monday, as holiday-thinned trading and caution ahead of rate decisions around the region sidelined most investors.
Regional stocks moved in tight ranges as the closure of China’s markets, a major driver of activity, tempered risk appetite and reduced momentum. Indonesia’s benchmark index opened at a record high but pared gains to trade flat, while Thailand's benchmark dropped 0.4%.
The MSCI indexes tracking EM Asia equities and a broader gauge tracking Asia-Pacific equities excluding Japan both slipped half a percentage point from their 2021-highs, scaled the day before.
Equity markets in Taiwan and South Korea, two of the main beneficiaries of the AI-driven rally in recent months and heavyweights in the indexes, were closed for public holidays.
Investor attention turned squarely to Japan, where the yen tumbled and stocks surged more than 4% after fiscal and monetary dove Sanae Takaichi was elected leader of the ruling party.
"There was a kind of resurrection of Abe trade in Japan markets, which will sway the market sentiment across Asia," said Kiyong Seong, lead Asia macro strategist at Societe Generale.
In the currency market, the peso fell 0.3% while the Singapore dollar and the Indonesian rupiah dropped 0.3% each. The Thai baht inched higher while the Malaysian ringgit edged lower.
Traders are now looking ahead to monetary policy decisions from the Philippine and Thai central banks later this week.
The Bangko Sentral ng Pilipinas (BSP) lowered interest rates by 25 basis points in August for the third straight easing. The country has been grappling with a widening corruption scandal that has triggered mass protests, weighing on both the peso and local stocks. Still, the economy continues to post steady growth, with inflation comfortably within target.
Analysts appear divided over how the BSP might move. Maybank and DBS analysts are expecting the central bank to hold while Standard Chartered expects an easing.
In contrast, with growth momentum softening in Thailand, investors broadly expect a 25-basis-point cut by the Bank of Thailand under its new dovish governor.
Maybank anticipates just one more 25-basis-point rate cut this year, as the governor continues efforts to bolster growth - potentially as early as next week.
Among stock markets, shares in Singapore and Malaysia edged higher while equities in Philippines fell 1%.
HIGHLIGHTS:
** Indonesian 10-year benchmark flat at 6.327%
** Thai Sept headline CPI drops 0.72% y/y - Reuters
