What’s going on here?
Most Asian currencies posted modest gains against the dollar as investors anticipate key US events like the presidential debate and PCE data release later this week.
What does this mean?
The anticipation comes at a critical time for US economic policy. Weak US inflation data might reinforce bets on a Federal Reserve rate cut, which futures currently estimate at 65%. This could challenge the US dollar’s dominance, especially with both economic and political factors in play, according to Mizuho Bank’s chief economist for Asia ex-Japan. Meanwhile, regional equities had mixed performances: Indonesian shares dipped 0.7%, Taiwan stocks declined 1.4%, Philippine equities and Thai stocks saw modest gains of 0.5% and a slight increase, respectively. South Korean stocks enjoyed a 0.6% rise.
Why should I care?
For markets: Currencies tiptoe around key US events.
In currency movements, the South Korean won rose 0.4% after four days of decline, while the Chinese yuan dropped to a seven-month low, poised for its sixth straight monthly decline. The Malaysian ringgit increased by 0.13% despite inflation data slightly exceeding forecasts, showing resilience compared to regional peers.
The bigger picture: Economic and political factors at play.
Country-specific highlights included rising Indonesian 10-year benchmark yields to 7.113%, the Thai central bank considering its current interest rate robust against many scenarios, and Japan’s readiness to respond to excessive yen volatility. Malaysia’s ringgit stood out for its strength, underlining the complexities in challenging USD dominance due to various economic and political factors.
