Rupiah and ringgit slip, equities fall as traders slash Fed rate cut bets

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• Rupiah, ringgit linger near three-week lows
• Bank Indonesia officials enter FX market
• MSCI EM Asia equities index at five-month low
• BofA economist predicts end of Fed cutting cycle

Equities and currencies in emerging Asian markets declined on Monday, with the Indonesian rupiah and Malaysian ringgit hovering near three-week lows, as traders dialled back their bets on U.S. Federal Reserve rate cuts after a robust jobs report.

An MSCI index of broad emerging market currencies <.MIEM00000CUS> slipped to its lowest since early July. Rupiah <IDR=> declined as much as 0.7% while the ringgit <MYR=> slipped 0.5%, both pinned close to their weakest since mid-December.

Equities also came under pressure, with stocks in Thailand <.SETI> and Malaysia <.KLSE>slipping more than 1% each, while those in the Philippines <.PSI> declined 2.2%.

An MSCI gauge of Asian emerging market equities <.MIMS00000PUS> dipped 1.8% to its lowest since early August, dragged largely by stocks in Taiwan <.TWII> and South Korea <.KS11>, which lost 2.4% and 1.3%, respectively.

Equities of the two East Asian economies hold an aggregate 35% weight in the MSCI gauge.

A strong U.S. jobs report late on Friday left traders heavily scaling back their expectations for Fed cuts. Markets now expect just 27 basis points of rate cuts in 2025, with the terminal rate now seen around 4.0% compared to the 3.0% before the report. 0#USDIRPR

“Given a resilient labour market, we now think the Fed cutting cycle is over,” said Bank of America’s senior U.S. economist, Aditya Bhave.

“Our base case has the Fed on an extended hold. But we think the risks for the next move are skewed toward a hike.”

The U.S. dollar jumped to its highest in more than two years on Monday, while the 10-year U.S. Treasury yield was at a 14-month high.

In Indonesia, the central bank entered the foreign exchange market on Monday to safeguard the rupiah’s stability and secure market confidence.

Bank Indonesia (BI) is set to meet later this week – the first time this year – after it held rates steady in its last three meetings, contrary to the two rate cuts expected after it embarked on its easing cycle in mid-September last year.

“BI will struggle to find the respite on the currency front needed to resume policy rate cuts this year,” analysts at Barclays said in a note. They have pushed their view of two quarter-point rate cuts to 2026 from 2025.

In China, the yuan <CNY=CFXS> rose marginally in the wake of the policy measures announced on Monday to defend the weakening currency. It was last trading at 7.3318, hovering around its 16-month lows.

South Korea’s won <KRW=KFTC> was largely flat at 1,470.80 per dollar, while Taiwan’s dollar <TWD=TP> slipped 0.5%. Singapore’s dollar <SGD=>, Thailand’s baht <THB=TH> and Malaysia’s ringgit <MYR=> weakened marginally.

HIGHLIGHTS:

** Indonesia’s 10-year benchmark yield <ID10YT=RR> rises 7.4 basis points to 7.243%

** China steps up policy measures to defend fragile yuan

** Malaysia imposes anti-dumping duties on iron, steel imports from 4 countries

** Thailand’s investment applications up 35% to 10-year high in 2024

—Reporting by Sameer Manekar in Bengaluru; Editing by Eileen Soreng