BENGALURU: Most Asian currencies inched slightly up on Monday as the dollar lost ground in volatile trading, while equities fell due to the intensifying conflict between Israel and Iran, with investors awaiting several central bank meetings this week.
Bank Indonesia is set to announce its monetary policy decision on Wednesday, hours before the US Federal Reserve, and is broadly expected to keep its benchmark interest rate steady after a surprise rate cut last month.
The Bangko Sentral ng Pilipinas (BSP) is expected to cut its key policy rate by 25 basis points, while Taiwan’s central bank is likely to maintain its interest rate, given the strong performance of the tech-focused economy. Both central banks will announce their rate decisions on Thursday.
The Taiwanese dollar, which touched a fresh three-year high last week and is up more than 10% this year, gained 0.5%.
The Indonesian rupiah and the South Korean won edged up 0.2% each.
The dollar index, which measures the currency against six peers, dipped 0.3% in choppy trading after gaining ground earlier, as rising geopolitical tensions following the escalation of an Israeli-Iranian conflict drove safe-haven flows into it.
Moreover, most emerging Asian economies, except Malaysia, import the bulk of their oil requirements and an increase in crude prices also hurts their currencies.
Oil prices were volatile on Monday, after surging 7% on Friday. Regional equities were broadly lower, with stocks in Manila
and Jakarta falling 0.6% and 0.3%, respectively.
Analysts at Nomura said while previous geopolitical events have typically caused only temporary market volatility, the recent strong rally in equities suggests a potential for de-risking and profit-taking.
