Global Market: Emerging Asian currencies fall as Fed hike bets rise, oil prices surge

Most emerging Asian currencies and stocks fell on Monday as investors increased bets that the US Federal Reserve could raise interest rates as early as September, while a surge in oil prices amid escalating U.S.-Iran tensions weighed on energy-importing economies, Reuters reported.

The MSCI emerging market currency index was largely unchanged in Singapore afternoon trading after hawkish comments from Fed Chair Kevin Warsh pushed the dollar to a near two-week high. The index remained on course for a 1.8% gain in August, marking its second consecutive monthly advance.

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Warsh's remarks on Friday that the Fed still needed to address inflation prompted markets to price in roughly a 57% chance of a rate hike in September. The shift has reduced expectations for a weaker dollar and put pressure on emerging-market currencies that had benefited from softer U.S. economic data.

Higher U.S. Treasury yields combined with elevated oil prices pose a challenge for Asian currencies, as rising yields can attract capital toward U.S. assets while expensive energy worsens trade and inflation pressures in oil-importing economies, Reuters reported, citing ACCM research director Glenn Yin.

The Indonesian rupiah fell 0.3% to 17,755 per dollar but remained on track for a 1.4% monthly gain, which would be its strongest monthly performance since May 2025. The Philippine peso also declined 0.3% and traded near a record low, while the Thai baht was little changed after touching a two-week low.

The South Korean won gained 0.5%, taking its year-to-date advance to about 5.1%. It was also headed for a second consecutive monthly gain, supported by strong semiconductor exports.

Meanwhile, oil prices surged toward $90 a barrel after a U.S. attack on Iran's Larak Island, raising concerns about wider disruptions to energy supplies from the Middle East.

The rise in oil prices added to pressure on regional equities. MSCI's gauge of emerging Asian stocks fell as much as 1.6%, although it remained on track for a gain of more than 3% in August, its strongest monthly performance since May.

South Korea's KOSPI recovered sharply to trade 0.5% higher after falling as much as 3.6% earlier in the session. Taiwan's benchmark slipped 0.4%, though it was still up around 7% for the month.

Investors are now awaiting the U.S. nonfarm payrolls report due Friday and consumer price data on September 11 for further clues on the Fed's policy path and the possibility of a rate hike next month.

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