BENGALURU (Aug 31): Most emerging Asian currencies and stocks fell on Monday as investors raised bets on a US rate hike as early as next month, while higher oil prices from escalating US-Iran tensions pressured the region’s oil importers.
The MSCI emerging market currency index was largely unchanged in Singapore afternoon trade, after hawkish remarks from Federal Reserve (Fed) Chair Kevin Warsh pushed the dollar near a two-week high.
The currency index was still on track to gain 1.8% for the month, its second straight monthly rise.
Warsh said on Friday the Fed still had work to do to control inflation, prompting traders to raise the odds of a September rate hike to about 57%.
For emerging market currencies, the shift unwinds expectations of a weaker dollar on softer US data, putting August’s gains at risk.
“Higher Treasury yields and high oil prices are a particularly difficult combination for Asian FX because one pulls capital toward the US while the other weakens the trade and inflation outlook for energy importers,” said Glenn Yin, director of research at ACCM.
Yin said a broader Fed rate-hike cycle would leave the rupiah, rupee, peso and baht most vulnerable.
The Indonesian rupiah fell 0.3% to 17,755 per dollar, but was set to gain 1.4% in August, its best month since May 2025.
The Philippine peso fell 0.3% and traded near a record low, while the Thai baht was little changed after touching a two-week low.
The South Korean won gained 0.5%, taking its rise this year to about 5.1%. It was set for a second straight monthly gain, helped by strong semiconductor exports.
Meanwhile, oil prices jumped to nearly US$90 a barrel after US attack on Iran’s Larak Island, fuelling fears of broader disruptions to Middle East energy supplies.
Regional equities came under pressure. MSCI’s gauge of emerging Asian equities fell as much as 1.6% on the day, though it remained on track to gain more than 3% in August, its strongest since May.
South Korea’s Kospi staged a strong rebound to gain 0.5%, having fallen as much as 3.6% earlier in the day. Taiwan stocks fell 0.4% but is still up 7% for the month.
Investors now turn their attention to Friday’s US payrolls report and Sept 11 consumer price data for fresh signals on whether the Fed could begin tightening policy as soon as next month.
Uploaded by Chng Shear Lane
