JAKARTA (Reuters): Equities and currencies in emerging Asian markets declined on Monday, with the Indonesian rupiah and Malaysian ringgit hovering near three-week lows, as traders dialled back their bets on US Federal Reserve rate cuts after a robust jobs report.
An MSCI index of broad emerging market currencies slipped to its lowest since early July.
Rupiah declined as much as 0.7% while the ringgit slipped 0.5%, both pinned close to their weakest since mid-December.
Equities also came under pressure, with stocks in Thailand and Malaysia slipping more than 1% each, while those in the Philippines declined 2.2%.
An MSCI gauge of Asian emerging market equities dipped 1.8% to its lowest since early August, dragged largely by stocks in Taiwan and South Korea , which lost 2.4% and 1.3%, respectively. Equities of the two East Asian economies hold an aggregate 35% weight in the MSCI gauge.
A strong U.S. jobs report late on Friday left traders heavily scaling back their expectations for Fed cuts. Markets now expect just 27 basis points of rate cuts in 2025, with the terminal rate now seen around 4.0% compared to the 3.0% before the report.
"Given a resilient labour market, we now think the Fed cutting cycle is over," said Bank of America's senior U.S. economist, Aditya Bhave. "Our base case has the Fed on an extended hold. But we think the risks for the next move are skewed toward a hike."
The U.S. dollar jumped to its highest in more than two years on Monday, while the 10-year US Treasury yield was at a 14-month high. In Indonesia, the central bank entered the foreign exchange market on Monday to safeguard the rupiah's stability and secure market confidence.
Bank Indonesia (BI) is set to meet later this week - the first time this year - after it held rates steady in its last three meetings, contrary to the two rate cuts expected after it embarked on its easing cycle in mid-September last year.
"BI will struggle to find the respite on the currency front needed to resume policy rate cuts this year," analysts at Barclays said in a note. They have pushed their view of two quarter-point rate cuts to 2026 from 2025.
In China, the yuan rose marginally in the wake of the policy measures announced on Monday to defend the weakening currency. It was last trading at 7.3318, hovering around its 16-month lows.
South Korea's won was largely flat at 1,470.80 per dollar, while Taiwan's dollar slipped 0.5%. Singapore's dollar, Thailand's baht and Malaysia's ringgit weakened marginally. - Reuters
