BENGALURU: Asian currencies weakened against a firm dollar on Wednesday, while stock markets in the region halted their bullish run as investors took a cautious approach on the US rate cut path, after optimism stoked by last week’s soft jobs data faded.
The South Korean won led losses among emerging Asian currencies with a 0.4% fall, while Thailand’s baht lost 0.3%.
The Indonesian rupiah fell 0.2%. The country’s finance minister said on Tuesday that the volatility in forex markets over the last month needed to be monitored and carefully managed, adding that the dollar’s strength was having a more immediate effect.
The dollar has remained dominant this whole year and it is “going to remain resilient because in our view, the Fed is only going to cut one time this year,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
“The market by anticipating more than one cut by the Fed, is overdone in the dovish expectation of the Fed,” Tan added.
Among other currencies, the Philippine peso and the Taiwanese dollar fell 0.2% each. Both the countries reported lower-than-expected inflation numbers on Tuesday.
The Malaysian ringgit fell by 0.2% ahead of a key interest rate decision on Thursday. The country’s central bank held rates steady at the last meeting but noted that the ringgit was undervalued.
“It is not a very acute situation for the (Malaysian) central bank, so I don’t think they will be driven to hike just because of the exchange rate,” Tan said.
Meanwhile, stock markets in the region were mixed as investors assessed the timing and number of likely US rate cuts this year, after last week’s softer-than-expected jobs data bolstered bets of policy easing.
Stocks in Indonesia fell as much as 0.7%, while Singapore shares lost 1.3%. Philippine shares gained 0.6% after falling as much as 0.7% in early trade, while stocks in Thailand were largely muted.
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