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Asian Currencies, Stocks on Back Foot as Rate-Cut Rally Dissipates

The Malaysian ringgit and the Thai baht led small losses in emerging Asian currencies on Monday, while stocks were largely mixed, as a US Federal Reserve (Fed)-fuelled market rally lost steam after comments from policymakers dampened bets on imminent rate cuts.

The Malaysian ringgit, the region's worst-performing currency this year, edged 0.5% lower.

The Thai baht dipped 0.3%, while the Philippine peso also inched 0.2% lower.

Risk-rally in the region faded after facing "a reality check as markets weigh recent comments from Fed officials", said Christopher Wong, currency analyst at OCBC.

"Expectations for Fed loosening can overshoot and when it corrects, the USD could still be subjected to rebound." 

New York Fed President John Williams said on Friday it was premature to speculate about interest rate cuts in March 2024.

The US dollar was still hovering near four-month lows on Monday.

Meanwhile, the Indonesian rupiah edged 0.1% lower, with the shares index also declining 0.9%.

Bank Indonesia will hold its policy rate meeting on Thursday.

"On the one hand, headwinds to growth have mounted as Indonesia's real policy rates (are) the most restrictive in Asean; as well as by historically," Vishnu Varathan of Mizuho Bank wrote.

"On the other hand, the tentative and nascent recovery of rupiah traction warns against premature easing."

Varathan's base case is for Bank Indonesia to stand pat in its last meeting in 2023.

The Shanghai Composite Index fell 0.4% as sentiment remained weak after recent data showed sluggish economic recovery in the world's second-largest economy. The yuan also eased 0.1%. 


Elsewhere, shares in Malaysia added 0.3%, while those in Singapore and Thailand dipped 0.1% each.

The Indian rupee, South Korean won and the Singaporean dollar were largely flat. The Taiwanese dollar fell 0.4%. 

Regional stocks and currencies received a boost last week after the Fed kept interest rates unchanged as expected and signalled prospects of lower borrowing costs next year.

Echoing the Fed, the Philippine central bank and the Taiwanese central bank kept interest rates unchanged.

However, both central banks were less dovish than the Fed, with the former not convinced about the downward trend in inflation holding and the latter flagging it would not necessarily follow the Fed in likely rate cuts next year.

Back in the US, investors will focus on core personal consumption expenditure (PCE) index data, the Fed's preferred measure of inflation, scheduled for release on Friday.

Source: Reuters

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