The Indonesian rupiah and Malaysian ringgit fell to multi-week lows among subdued Asian currencies on Monday, as strong U.S. economic data tempered Federal Reserve rate cut wagers, and bets of Donald Trump winning the presidency buoyed the greenback.
The rupiah fell 0.6% to hit its lowest level since mid-August, and was headed for its biggest monthly fall since March 2020.
The dollar was headed for its sharpest monthly rise in around 2-1/2 years on the back of rising U.S. yields. Solid economic data leading to prospects of the Fed not cutting as far and big as investors had earlier anticipated has diminished the yield appeal of some emerging market currencies.
Markets now price almost no chance of a 50-basis point cut by the Fed at its November meeting, down from a nearly 50% chance priced in a month ago, according to CME's FedWatch tool.
"U.S. assets and the dollar are still preeminent and that's certainly one of the major drivers around currencies, and with that the relative attractiveness of different assets," said Michael Wan, senior currency analyst at MUFG.
"But if China were to put out meaningful stimulus, or if stories such as the AI chip boom or semiconductor developments gain limelight - that could also change the calculus somewhat in terms of the relative attractiveness of Asian assets."
The ringgit declined 0.5% to hit its lowest since early-September and was on course to log its worst monthly performance since late-2016.
Malaysian palm oil futures declined for a second consecutive session, while oil prices also slumped over 4%.
The recent unexpected decline in exports and a widening trade surplus have also kept the ringgit's gains in check.
Barclays analysts expect the ringgit to remain susceptible to U.S. election risks and think that the country's central bank likely paused replenishing its FX buffers amidst dollar strength.
Among other currencies, the Philippine peso and South Korean won advanced 0.3% each, while the Singapore dollar fell 0.2%.
China's yuan fell 0.2% to a more than two-month low against the dollar.
Among Asian equities, Indonesian stocks fell about 1% to hit their lowest level since mid-October, while South Korean stocks rose 1% as local battery suppliers of Tesla gained after the EV market leader's rally last week.
Third-quarter employment data from the U.S. on Oct. 31 remains on top of investors' watch list for the week, while they are also watching for GDP data from Hong Kong and Taiwan, and inflation data from Indonesia.
HIGHLIGHTS:
** Japan's government in flux after election gives no party majority
** China launches new lending tool ahead of year-end loan expiry - Reuters
