Asian currencies edge up, stocks fall on Mideast tensions; focus on central bank meetings

• Taiwan dollar rises 0.5%
• Thailand stocks pare losses; baht down 0.3%
• Indonesia, Philippines, Taiwan rate decisions due this week

Most Asian currencies inched slightly up on Monday as the dollar lost ground in volatile trading, while equities fell due to the intensifying conflict between Israel and Iran, with investors awaiting several central bank meetings this week.

Bank Indonesia is set to announce its monetary policy decision on Wednesday, hours before the U.S. Federal Reserve, and is broadly expected to keep its benchmark interest rate steady after a surprise rate cut last month.

The Bangko Sentral ng Pilipinas (BSP) is expected to cut its key policy rate by 25 basis points, while Taiwan’s central bank is likely to maintain its interest rate, given the strong performance of the tech-focused economy. Both central banks will announce their rate decisions on Thursday.

The Taiwanese dollar <TWD=TP>, which touched a fresh three-year high last week and is up more than 10% this year, gained 0.5%.

The Indonesian rupiah <IDR=> and the South Korean won <KRW=KFTC> edged up 0.2% each.

The dollar index <=USD>, which measures the currency against six peers, dipped 0.3% in choppy trading after gaining ground earlier, as rising geopolitical tensions following the escalation of an Israeli-Iranian conflict drove safe-haven flows into it.

Moreover, most emerging Asian economies, except Malaysia, import the bulk of their oil requirements and an increase in crude prices also hurts their currencies.

Oil prices were volatile on Monday, after surging 7% on Friday.

Regional equities were broadly lower, with stocks in Manila <.PSI> and Jakarta <.JKSE> falling 0.6% and 0.3%, respectively.

Analysts at Nomura said while previous geopolitical events have typically caused only temporary market volatility, the recent strong rally in equities suggests a potential for de-risking and profit-taking.

“Asian stocks could be particularly vulnerable through two channels: sustained higher oil prices impacting oil-importing countries; and risk-off sentiment affecting high-beta markets more severely,” they said in a note.

South Korean shares <.KS11> rose 1.8% to their highest level since January 2022, after authorities vowed to closely monitor financial markets and deploy “immediate and bold measures” in case of heightened volatility.

In Thailand, stocks <.SETI> pared losses and were last down 0.1%. They fell as much as 1.2% to a more than two-month low earlier in the session.

Thailand’s commerce minister said the country would have trade talks with the United States and expressed confidence that both sides could agree on good terms on tariffs, possibly as low as 10%.

However, he also called for a weaker baht <THB=TH>, at the level of 37-38 per dollar, to support exports and tourism.

The currency weakened 0.3% to 32.455 per dollar on Monday.

HIGHLIGHTS:

** China’s May factory output slows, retail sales surprisingly upbeat

** G7 leaders in Canada to discuss Israel-Iran conflict, hope to avoid Trump clash