BENGALURU (June 16): Emerging Asian currencies lost steam on Tuesday, while equities posted smaller gains after a sharp rally in the last session, as a lack of details from a preliminary deal to end the Iran war kept investor optimism in check.
The Philippine peso snapped a six-session winning run to slip to 60.458 per dollar, while the ringgit depreciated to 4.062 after a three-session gaining streak.
The South Korean won appreciated slightly to 1,511.4 per dollar in its third straight session of gains.
Initial optimism over the US-Iran memorandum of understanding aimed at ending their war gave way to caution, as markets focused on the lack of public details and the absence of a permanent truce.
Oil prices rebounded slightly after hitting a three-month low on Monday, with shippers still cautious about transiting the Strait of Hormuz.
“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 (memorandum of understanding) holds,” said Billy Leung, an investment strategist at Global X ETFs Australia.
“The Monday rally across Asia…tells you markets are pricing something close to genuine resolution, but it would be a mistake to read it as full conviction.”
Stock markets across emerging Asia rose slightly, led by South Korea’s 2.4% gain after a 5.2% jump on Monday. Equities in Taiwan recouped early losses to gain as much as 0.8%.
Malaysian equities rose 0.7%, while those in the Philippines and Singapore edged higher 0.7% and 0.5% respectively. Markets in Indonesia were closed for a holiday.
Market focus is on a slew of central bank meetings this week, including the US Federal Reserve decision on Wednesday — the first under newly appointed chair Kevin Warsh.
Among regional central banks, analysts expect Bank Indonesia and Bangko Sentral ng Pilipinas to retain their hawkish biases.
“The moderation in currency depreciation and reduced concerns over spiralling inflation will likely ease pressure on some Southeast Asian central banks to adopt aggressive monetary policy moves,” analysts at DBS said in a note.
The two central banks meeting later this week would likely welcome the US-Iran breakthrough and limit any rate hikes to 25 basis points to support their currencies, they said.
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.
