Emerging Asian currencies struggled for momentum against a resilient dollar on Monday, while stock markets were mixed, as investors awaited a flurry of U.S. economic data this week to get more clarity on the Federal Reserve's rate outlook.
MSCI's index tracking EM currencies fell for a third straight session and was trading near 5-month-lows.
The Philippine peso lost as much as 0.4% to its lowest level in nearly two weeks.
The Malaysian ringgit, the only Asian currency to rise in 2024, fell 0.3% against the dollar, which stood near a two-year peak.
The Chinese yuan fell to a 16-month low. It breached the key 7.3 per dollar for the first time since 2023 on Friday, as the threat of Trump tariffs looms.
The yuan has hit fresh lows routinely since Donald Trump won the U.S. presidential election on fears of increased tariffs on Chinese products and worries about China's economic recovery.
China is Southeast Asia's largest trading partner and a weaker yuan could send ripples across regional currencies.
"While the depreciating currency (yuan) may act as a shock absorber for the Chinese economy, especially exporters, it is a risk to EM asset valuations, because it will indirectly strengthen the US dollar and therefore tighten financial conditions," said Kyle Rodda, a senior financial market analyst at Capital.com.
Moreover, markets have stayed cautious ahead of Trump's inauguration on Jan. 20 due to uncertainty over his plans for hefty U.S. import tariffs, tax cuts and immigration restrictions, which have lent support to the dollar and pressured emerging currencies.
"If it becomes apparent that tariffs aren't merely a negotiating tactic and they are applied as threatened, then Asian FX could easily depreciate further from here as the dollar rises," Rodda said.
Regional stock markets were mixed on Monday. Shares in Taiwan and South Korea rose 2.8% and 1.7% respectively, lifted by chip stocks after Microsoft unveiled plans to boost investment in data centres.
Meanwhile, stocks in Indonesia and Malaysia fell 0.7% and 0.2%, respectively. Thailand equities were down 0.2% and the baht fell 0.3%.
Data showed the country's inflation rate returned to the target range for the first time since May last year. Inflation data from the Philippines and China, and trade data from Taiwan will be on investors' radar this week.
Focus will also be on the U.S. December payrolls report on Friday, and minutes of the Fed's last policy meeting due Wednesday.
HIGHLIGHTS:
** Indonesia's budget deficit in 2024 at 2.3% of GDP
** Chinese bourses met with foreign institutions amid volatility
** Canada PM Trudeau is likely to announce resignation, source says - Reuters
