ASIAN currencies slid against the dollar on Monday as caution prevailed ahead of a string of central bank meetings in a week packed with the release of key economic data dominated by the U.S. Federal Reserve's rate decision.
The Indonesian rupiah declined 0.4% against the dollar, leading losses among Asian peers, while equities in the region were mixed, with shares in South Korea skidding 0.7% lower.
The markets are eyeing U.S. inflation data due Tuesday, a day before the Fed interest rate decision. U.S. core inflation is expected to rise 0.4% month-on-month and the headline inflation by 0.2%, according to a poll by Reuters.
The Reserve Bank of Australia and the Bank of Canada surprised markets last week by raising interest rates to curb sticky inflation, fanning fears that the Federal Reserve might follow suit with a hawkish stance in its June meeting.
Markets are pricing for a 73% probability the U.S. central bank will stay put when it meets on June 13-14, according to CME FedWatch tool.
"The market has all but moved on to what happens in the following meeting in July. Given the economy's slow but steady state of affairs, the chance of a hike in that meeting is non-trivial, in our view," economists with DBS Bank said in a note.
Meetings of the U.S. Fed, the European Central Bank (ECB) and the Bank of Japan (BOJ) will set the tone for the week, with markets looking for cues on the direction of interest rates.
The Indian rupee held steady against the dollar, ahead of domestic inflation data due later in the day. Economists reckon consumer inflation easing to a 4.42% increase in May from 4.7% in the previous month, a Reuters poll showed.
China's yuan fell to a six-month low against the dollar, with the People's Bank of China (PBOC) due to roll over maturing policy loans. A batch of 200 billion yuan ($28 billion) worth of medium-term policy loans is due to mature on Thursday, when the focus is on the rate at which they will be rolled over.
"Lower funding costs for banks and PBOC Governor Yi Gang mentioning counter-cyclical measures have added to rate cut expectation," said Frances Cheung, rates strategist at OCBC Bank.
With a faltering post-pandemic recovery and disappointing domestic economic data, expectations for more easing by the PBOC have increased.
The Thai baht pared some losses after skidding 0.5% against the dollar earlier, while equities in Bangkok fell 0.5%, with uncertainty looming over the formation of a new government in the country.
"Investor confidence in the country's stock market has suffered as a result of uncertainty surrounding the formation of a new government, as has foreign investor confidence, which is weighing on the currency," said Poon Panichpibool, a markets strategist at Krung Thai Bank. Elsewhere, the Turkish lira slid to a new low of 23.77 per dollar.
HIGHLIGHTS:
** Malaysia's end-May palm oil inventories rose for the first time in four months
** The yields on Japanese government bonds fell as investors strengthened bets for the BOJ to leave stimulus settings unchanged at its meeting this week - Reuters
