Risk aversion grips Asian stocks, currencies; Philippines cuts rates as expected

SINGAPORE/HONG KONG: Asian stock markets and currencies fell on Thursday on broader risk-off sentiment as cautious investors weighed the possibility of US involvement in the Israel-Iran conflict.
Meanwhile, the Philippine central bank cut its policy rate by 25 basis points as expected. Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona stated that while an accommodative policy was needed, there were risks associated with geopolitical tensions and external policy uncertainty that had to be monitored.
The peso was largely unchanged after the decision, still trading down 0.6 per cent near a two-month low. Iran and Israel traded further air attacks as US President Donald Trump kept markets guessing on whether Washington would join Israel's strikes on Iranian nuclear facilities.
The Israeli shekel weakened 0.3 per cent. The Indonesian rupiah fell 0.6 per cent to a near three-month low and the Indian rupee dipped 0.3 per cent. The South Korean won fell as much as 1 per cent and the Vietnamese dong touched a record low.
"Geopolitical developments remain fluid, and caution is warranted as we head into the weekend," said Christopher Wong, currency strategist at OCBC.
With oil prices at risk of going higher as a result, net-oil importing currencies such as the peso, the rupee, the won and the Thai baht may be affected more than other peers, he added.
The Taiwan dollar weakened 0.3 per cent ahead of its central bank's rate decision, in which it is likely to maintain its policy rate. The Thai baht fell as much as 0.9 per cent to a one-month low as political uncertainty weighed on already fragile sentiment.
Thai Prime Minister Paetongtarn Shinawatra's government hangs by a thread, with coalition partners reconsidering their support after a major player's exit threatened to bring down the administration.
In the near term, political uncertainty may weaken the baht further, as foreign investors lose confidence and sell Thai assets especially if the US dollar strengthens and gold prices continue to fall, said Poon Panichpibool, markets strategist at Krung Thai Bank.
Bangkok equities dropped as much as 2.4 per cent to their lowest since April 9. Other stock markets also tumbled, with equities in Taiwan slipping 1.6 per cent and those in Singapore down 0.6 per cent.
Indonesia stocks dropped 2.4 per cent to their lowest since May 14, a day after the country's central bank paused its easing cycle just hours before the US Federal Reserve held rates steady as expected.

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