Most emerging Asian currencies were set to log in monthly gains against the US dollar on increasing expectations that the Federal Reserve will slash policy rates as early as March next year, even as they remained subdued on Thursday.
The MSCI International Emerging Market Currency Index rose about 0.3%, hitting its highest since April 2022, and was also set to mark its best month in a year, up nearly 3%.
In the region, the South Korean won led the pack with a gain of about 4.7% for the month, its biggest since last November, while the Taiwan dollar and Thailand’s baht rose about 3.9% and 2.9%, with the former snapping a seven-month weak run.
The Indonesian rupiah also snapped a six-month losing streak to gain nearly 2.5%.
Investors will now look out for the US Personal Consumption Expenditure Index and the ISM Purchasing Managers Index data later in the day, where market participants are likely to get a clearer idea on where rates are headed.
“Markets are increasingly coming to terms that the Fed is likely done tightening for the current cycle and expectations are building up for the Fed to cut as much as nearly 120bps for 2024, while a May cut is now fully priced (in),” Christopher Wong, a currency strategist with OCBC said.
During the day, the Indonesian rupiah lost the most among the pack, dropping around 0.6%, while the Thai baht lost around 0.3%, as the dollar partially regained some ground and as weak economic data from Asia’s largest economy added to growth woes.
Asian currencies: Taiwan dollar, Malaysian ringgit lead gains
Moreover, the Indonesian central bank said that it will maintain its benchmark rate at current levels, signalling that it was done with its rate hike cycle.
At 0425 GMT, the dollar index, which measures the strength of the greenback against six major rivals, stood at 102.79, even as it hovered near its three-month low.
The Philippines peso, Malaysian ringgit and the Taiwan dollar traded flat to marginally down.
The South Korean won, however, edged up after the country’s central bank kept its benchmark interest rate unchanged again, even as it cut its outlook for economic growth.
Separately, India will report its quarterly GDP data later in the day, where growth is said to have moderated to 6.8% in the July-September quarter from 7.8% in the previous quarter.
Among Asian equities, stocks in Singapore, Thailand, Malaysia and Philippines fell in the range of 0.4% and 0.7%.
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