Malaysia's ringgit reached a 26-year low as emerging Asian currencies weakened against the dollar on Tuesday, while the Chinese yuan slid after China cut its benchmark mortgage rate by more than expected, but found support from state bank buying.
The ringgit weakened as much as 0.2% to its lowest level since January 1998. The South Korean won and the Taiwanese dollar inched 0.2% and 0.3% lower, respectively.
"Negative rate differentials with the U.S., have translated into capital outflows and corporate hoarding of USD, exacerbating the downward pressure on the ringgit," Nicholas Chia, macro strategist at Standard Chartered, said.
Meanwhile, the Chinese yuan was last largely unchanged at 7.198 per dollar, after touching its lowest level in three months earlier in the session.
Sources told Reuters that China's major state-owned banks were seen selling dollars in an attempt to arrest weakness in the yuan in the wake of a deep cut to the benchmark mortgage rate.
China cut the five-year loan prime rate (LPR), the benchmark reference rate for mortgages, by 25 basis points to 3.95% at a monthly fixing, as authorities ramped up efforts to stimulate credit demand and revive the property market.
That was a deeper cut than the five to 15-basis point reduction market watchers polled by Reuters had expected and was the largest cut since the reference rate was introduced in 2019.
Shanghai stocks were flat, while those in Seoul dropped 1.2%, as investors booked profits after a recent rally.
Equities in Kuala Lumpur rose 0.5% to their highest level since early-June 2022, and stocks in Manila rose 0.4%.
Thailand's stock market, however, fell 0.5% and the baht weakened as much as 0.6% to its lowest level since Nov. 1, 2023. Data on Monday showed Thailand's economy unexpectedly contracted in the fourth quarter of 2023.
Prime Minister Srettha Thavisin said the economy was in a critical stage and again urged the central bank to cut interest rates without waiting for a scheduled meeting. Srettha, who is also finance minister, has been at loggerheads with the Bank of Thailand (BOT) over the direction of monetary policy.
"Given the very weak economic data yesterday, BOT is under heavy pressure from various fronts to ease rates and we would not rule out the risk that they may have to start an easing cycle with multiple cuts ahead of the Fed," analysts at Maybank wrote.
The Bank of Thailand's next meeting is scheduled for April 10. In Indonesia, the rupiah inched 0.2% lower while stocks were up 0.6% ahead of Bank Indonesia's (BI) rate decision on Wednesday.
Economists in a Reuters poll expect BI to keep its key policy rate unchanged on the back of subdued inflation and an improving currency outlook and see the first rate cut in the next quarter.
HIGHLIGHTS
** Philippines posts $740 million deficit in January
** Thailand plans $1 bln in overseas bonds, official says
** Malaysia's Jan exports rise more than expected
