BENGALURU: Most emerging Asian currencies inched up as the dollar steadied on Wednesday and stocks were largely mixed, while Indian stocks were volatile as investors digested an unexpectedly narrow election win for Prime Minister Narendra Modi's alliance.
The Nifty index was last up 2 per cent having swung between gains and losses in early trading.
The scenario of Modi's Bharatiya Janata Party (BJP) needing to depend on regional parties, whose political loyalties have wavered over the years, to form the government raised concerns over economic policies, worrying investors.
"The election outcome poses near-term uncertainty but is unlikely to alter the economy's path," DBS analysts wrote in a note.
"Consolidation might return in the near-term as government and cabinet formation looms in the background," they said, adding that political developments are not expected to sway the monetary policy direction or outlook for the country.
Elsewhere in Asia, the Malaysian ringgit, the Thai baht and the Taiwanese dollar edged up 0.1 per cent each.
The South Korean won advanced 0.4 per cent and was set for its best day in nearly two weeks.
Official statistics released on Tuesday showed the country's consumer inflation fell in May for the second consecutive month to a 10-month low, coming in lower than market expectations.
Shares in Seoul rose 1.2 per cent to their highest since May 29, propelled by heavyweight chipmaker Samsung Electronics after remarks by Nvidia's CEO allayed investor concerns about its processors lagging behind competitors.
The Philippine peso rose 0.1 per cent, while equities in the region were up 0.4 per cent, after data showed that Philippine annual inflation quickened for a fourth straight month in May.
The Bangko Sentral ng Pilipinas (BSP) said the data was consistent with its expectations that inflation could accelerate over the near term.
On Tuesday, BSP Governor Eli Remolona had reiterated that the benchmark policy rate, currently at a 17-year high of 6.50 per cent, could be cut before the U.S. Federal Reserve starts it easing cycle. Other regional stock markets also rose. Shares in Bangkok rose 0.3 per cent, while those in Taiwan and Singapore rose 0.6 per cent and 0.3 per cent, respectively. Bets on an interest rate cut in September by the U.S. Federal Reserve firmed after data showed U.S. job openings fell more than expected in April to the lowest level in more than three years, a sign that labour market conditions are softening. Global investors are now looking out for the European Central Bank's policy decision on Thursday and for monthly U.S. payroll figures due on Friday.
Bucking the positive trend in Asia, the Indonesian rupiah was down 0.3 per cent at its lowest since April 8, while equities dropped 1.4 per cent.
Indonesia's central bank will continue to intervene in the foreign exchange market amid global volatility, its governor said on Wednesday, adding the rupiah would strengthen next year.
In Mexico, the peso extended losses for a second session on Tuesday after a strong election victory for the country's ruling party sparked concerns the government could easily pass disputed constitutional reforms.