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Asian emerging market currencies were weaker against a buoyant dollar on Monday as investors bet the Federal Reserve will lay the ground for US interest rate rises, with Indonesia’s rupiah touching a new 17-year low.
As the rupiah traded at levels last seen in 1998, in the wake of the Asian financial crisis, the Thai baht, and Malaysian ringgit also weakened.
The dollar’s surge is being driven by expectations that Fed chair Janet Yellen will indicate following this week’s policy meeting that rates will rise sooner rather than later following a run of upbeat US economic data.
Some emerging markets are viewed as vulnerable to rising US rates and a strong dollar because they are dependent on foreign financing and lose their allure for investors if better returns are available on less risky developed world assets.
Turkey’s lira bucked the trend on Monday, however, rising 0.7 per cent against the dollar after the country’s finance minister endorsed central bank independence in comments over the week-end.
“The lira has rallied and I think it reflects the apparent improvement in relations between the central bank and the president. This may mean monetary policy isn’t loosened as far as had seemed likely,’’ said William Jackson, emerging markets economist at Capital Economics in London.
Russian equities were weaker, with the dollar-denominated RTS dropping 1.4 per cent, while the rouble was 0.1 per cent lower versus the dollar on soft oil prices and questions over President Vladimir Putin's whereabouts.
Putin is due to speak in St Petersburg later on Monday and SEB analysts warned in a note the rouble “will likely take a hit’’ if he fails to appear.
The Brazilian real slipped against the dollar after a week-end that saw close to a million demonstrators march in cities and towns across the country to protest the government’s economic record.
With Brent crude prices more than 1 per cent lower, Middle Eastern shares struggled, with Saudi equities 0.5 per cent lower, Dubai down 2 per cent and Abu Dhabi retreating 1 per cent.
Elsewhere, Bulgaria has started meeting investors ahead of a potential euro-denominated bond.
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