MANILA (Reuters:): Most Asian currencies advanced on Monday as the dollar took a breather at the start of a week packed with the U.S. presidential election, a Federal Reserve meeting, and inflation data from Asian countries.
The Philippine peso was up 0.5%, while the South Korean won and the Singapore dollar climbed 0.6% and 0.7% respectively.
They had posted consecutive weekly declines in the prior week. The dollar was down 0.3% as investors braced for the U.S. election on Tuesday and the Fed's rate decision on Thursday.
Democratic candidate Kamala Harris and Republican Donald Trump remain virtually tied in opinion polls , while a 25 basis points Fed rate cut has been fully priced in.
"Last week was basically the dollar rallying on greater expectations of a Trump victory. Now, I think as we get closer to the actual event, there's a little bit of rebalancing going on," said Robert Carnell, regional head of research, Asia Pacific, at ING.
Even if Trump wins, which would normally be dollar positive, the initial response might not be for a dollar rally. Hence, investors are squaring their positions, he said.
Meanwhile, MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.7%. Equities in South Korea jumped 1.5% while those in Singapore rose 0.6%. Investors are also awaiting inflation data from South Korea, the Philippines, Thailand, and Taiwan, all due this week, to gauge the rate outlook of their central banks.
Last month, the Bank of Korea, Bank of Thailand and Bank Indonesia kicked off their easing cycles, while the Philippine central bank reduced rates by another 25 bps.
However, most Asian central banks will ease more slowly than the Fed over the coming year as their inflation remains broadly within targets and growth is still resilient, a Reuters poll showed.
"A stronger dollar makes the local central banks in the Asia region just a little bit more hesitant about easing their own policy rate. They don't want to cut and then just see the benefits of that washed away in a weak currency, which then ends up bringing in more inflation," said Carnell.
The Bank Negara Malaysia is expected to keep interest rates steady at 3.0% on Wednesday, and hold it there at least through 2025. Equities in Malaysia climbed 0.6% while the ringgit , one of the best performing currencies this year, was up 0.3%.
Elsewhere, Taiwan shares rose 0.7%, and the Taiwanese dollar climbed 0.4%. Bucking the trend, stocks in Philippines and Indonesia, fell 0.4% and 0.7%, respectively. - Reuters
