Asian currencies fall as middle east tensions boost dollar safe-haven demand
Iran and Israel launched new missile strikes at each other, with US President Donald Trump calling for Iran's unconditional surrender and warning US patience was wearing thin.
Moreover, market jitters intensified after officials said the US military is bolstering its presence in the region. The Israeli shekel was last largely flat at 3.5048 per dollar. It fell 0.4 per cent on Tuesday.
The MSCI index of emerging market currencies edged down 0.2 per cent. The Malaysian ringgit inched 0.1 per cent lower, and the Indian rupee fell to a more than two-month low. The dollar index was little changed after a 0.6 per cent jump in the previous session.
Oil prices extended gains after jumping more than 4 per cent on Tuesday. Most emerging Asian economies, except Malaysia, import the bulk of their oil requirements, and increasing crude prices also hurt their currencies.
The Philippine peso fell 1 per cent to its lowest level since mid-April. The peso has performed well for most of this year, which is making it vulnerable as negative factors, including higher oil prices and concerns of a rate cut by the central bank, start weighing in, said Alan Lau, FX strategist at Maybank.
The Bangko Sentral ng Pilipinas (BSP) is expected to lower its key interest rate by 25 basis points on Thursday. The Taiwanese dollar was flat, and the South Korean won inched up 0.1 per cent.
In Indonesia, the rupiah weakened 0.3 per cent and stocks fell 0.5 per cent ahead of the central bank's monetary policy decision later in the day.
"Today's BI rate decision is likely to be a close call, split between a pause and a back-to-back rate cut," DBS analysts said in a note.
Inflation developments are conducive, with recent stimulus measures expected to further restrain price pressures, however, policymakers might view the recent Middle East tensions and its impact on the regional currencies with trepidation, they added.
Other regional stock markets were mixed. Manila and Singapore shares fell 0.1 per cent and 03 per cent, respectively. Taipei and Seoul equities rose 0.4 per cent and 0.2 per cent, respectively, driven by technology stock gains.
Markets were also awaiting the Federal Reserve's policy decision later on Wednesday, expectating for the central bank to stand pat on rates.
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