BENGALURU (May 11): Most emerging Asian currencies retreated on Monday, weighed down by a resilient US dollar as unresolved US-Iran peace negotiations fuelled safe-haven demand, while a relentless AI-driven rally lent support to regional stock markets.
MSCI’s index tracking global EM currencies fell 0.1%, while the EM Asia equities gauge advanced more than 1% to a record high, led by South Korea’s tech-heavy Kospi.
The Philippine peso declined as much as 0.8% in its biggest single-day decline since the end of April, while the South Korean won depreciated to a one-week low of 1,476.64 per US dollar.
The dollar index rose to 98.003 after President Donald Trump swiftly rejected Iran’s response to a US peace proposal, calling it “totally unacceptable”, sparking a rally in oil prices.
Energy-dependent Asian economies are exposed to higher oil prices and the stronger inflation and strained economic growth that can result.
“Geopolitical developments will keep policymakers cautious, particularly with the external pressures across the region becoming more differentiated,” said Lavanya Venkateswaran, a senior Asean economist at OCBC Bank, adding that both price and external risks were emerging for regional central banks.
The Indonesian rupiah hovered a few points shy of its record low of 17,445 against the dollar, while the equities pared losses to trade 0.3% down after slumping as much as 1.8% earlier in the session following Indonesia’s decision to delay plans to impose higher royalties and export duties on minerals.
However, caution prevailed ahead of MSCI’s May review on Tuesday, with the global index provider having earlier indicated it would keep curbs on Indonesian stocks in its global indices.
Shares had tumbled in January after MSCI warned that Indonesia could be downgraded to frontier-market status, citing concerns about transparency.
Meanwhile, stock markets in the rest of the region advanced, with Kospi ending 4.3% higher at a record close on a chipmaker rally driven by artificial intelligence-fuelled optimism.
Samsung Electronics rose more than 5% and SK Hynix gained more than 10%, with both chipmakers hitting record levels.
China recorded a 45-month high in factory gate inflation in data released on Monday.
“The war in Iran, which has sent global energy prices sharply higher, has helped China emerge from deflation more quickly,” said Kelvin Lam, senior China+ economist at Pantheon Macroeconomics. “The faster reflation process has been led by upstream industries.”
Equities in Manila, Singapore and Kuala Lumpur added between 0.4% and 0.5%.
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