Emerging-market currencies fell 0.2% to a one-month low as investors weighed lingering Middle East tensions and awaited US economic data. The South Korean won and Taiwanese dollar underperformed regional peers amid equity outflows. US President Donald Trump indicated he wants to give diplomacy more time before deciding whether to resume strikes on Iran after this week's midterm elections. Brent crude fell around 3% to about $110 a barrel after gaining more than 2% on Friday. Investors are awaiting US labor data for clues on the Federal Reserve's policy outlook. "Resilient employment would reinforce expectations for further Fed tightening, while elevated oil prices provide an additional drag on the region's energy importers," MUFG Bank FX strategist Lloyd Chan wrote in a note. "The combination of higher US yields and expensive oil would remain an unfavorable backdrop for regional FX."
Emerging-market equities erased earlier losses to gain 0.2% as some investors viewed the recent selloff in AI-related shares as a buying opportunity. Benchmark indexes in South Korea, Hong Kong and India advanced, while those in Japan and Taiwan fell. EM equity valuations are "cheaper than at the two prior troughs" but uncertainties surrounding US midterm elections and the Middle East situation remain, Morgan Stanley analysts including Jonathan Garner wrote in a note. "We are not yet constructive but believe the current correction is now well advanced," they said.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing