LONDON: The Malaysian ringgit fell more than 1 per cent on Tuesday as emerging Asian currencies lost ground against a stronger dollar after Federal Reserve Chair Jerome Powell signalled that another outsized interest rate cut was unlikely in November.
The ringgit fell from a 3-1/2 year high scaled on Monday and was last trading at 4.173 per dollar, while the Thai baht slipped from its early 2022 highs.
Both currencies have outperformed in the Asean region, driven by improved political stability, foreign inflows and stable growth outlooks.
Other currencies such as the Taiwan dollar, Indonesia's rupiah , the Philippine peso and the Singapore dollar traded flat to lower.
In the United States, Powell pushed back against aggressive easing bets, forecasting the central bank was likely to stick with quarter-percentage-point rate cuts moving forward.
Falling U.S. rates boost the attractiveness of riskier assets and have driven cash into emerging markets, particularly into Southeast Asia where investors have held very low exposures for years.
This week, investors will monitor inflation data from South Korea and the Philippines to gauge the trajectory of monetary policies, while a key U.S. jobs report will likely decide the Fed's rate cut trajectory.
Indonesian prices rose at their slowest rate in almost three years in September, providing further room for the country's central bank to slash rates.
While Indonesia and the Philippines have already started easing monetary policies, pressure is mounting on the Bank of Korea to cut rates at its upcoming meeting as slowdown concerns linger.
The Philippine central bank flagged on Monday that it has room for a 50 basis-point cut, although 25 bps will be the norm.
"Not only have the Fed's rate cut and China's stimulus measures boosted the region's risk assets, but their actions could also embolden other central banks to opt for more aggressive rate cuts than our prevailing forecasts," said Juliana Lee, Deutsche Bank's chief economist for Asia.
Among Asian stock markets, Manila recovered the previous session's losses to trade 1.5 per cent higher.
Markets in Jakarta, Bangkok and Taipei rose between 0.7 per cent and 1 per cent.
Tokyo shares rose 1.9 per cent, led by defence stocks.
Chinese markets are closed for the rest of the week for public holidays.
Shanghai shares had recorded their best session in 16 years on Monday after weekend stimulus measures led to global investors pouring their money into previously beaten-down Chinese stocks.
Markets in Seoul and Hong Kong were also closed due to public holidays.