Asian markets slip as Fed rate hike bets and oil surge weigh
Asian currencies and stocks fell as hawkish Fed remarks boosted rate hike bets, while oil prices surged on Middle East tensions.
Most Asian currencies and stock markets started the week on a weak note, pressured by growing expectations of a US Federal Reserve rate hike next month and a jump in global oil prices.
The US dollar hovered near a two-week high after Fed Chair Kevin Warsh indicated that more work was needed to control inflation. Traders have now priced in roughly a 60% chance of a September rate increase, according to CME's Fedwatch tool. This shift in sentiment has reversed recent optimism that softer US data might ease the Fed's policy stance.
The Indonesian rupiah weakened to 17,755 per dollar, though it remains on track for its best month since May 2025, up about 1.4% in August. The Thai baht slipped to a two-week low of 33.235 per dollar, while the Philippine peso hovered near its record low of 62.382, weighed down by high energy costs and sluggish inflows.
The South Korean won, however, edged up to 1,372.71 per dollar, supported by strong semiconductor exports. It is set for a second straight monthly gain, up 4.7% this month.
Oil prices climbed after US forces struck Iranian missile launchers on Sunday, raising concerns about supply disruptions from the Middle East. This adds further pressure on oil-importing economies in the region.
Equity markets also declined, with South Korea's KOSPI and Taiwan's benchmark falling nearly 2% at one point. The MSCI gauge of emerging Asian equities slipped as much as 1.6% on the day.
Investors are now looking ahead to Friday's US payrolls report and August inflation data for clearer signals on the Fed's next move. Markets in Malaysia and the Philippines were closed for a public holiday.