BENGALURU: Asian currencies were subdued on Tuesday, with the Philippine peso leading losses, as investors took a cautious stance ahead of a highly anticipated US inflation report that could trigger a substantial interest rate cut from the Federal Reserve.
The Philippine peso lost as much as 0.5%, declining for a third straight session. The South Korean won and the Taiwanese dollar declined 0.2% and 0.3%, respectively.
The US dollar index, which measures the currency against six major peers, was steady at 101.61 as of 0632 GMT after rising 0.4% on Monday.
The index has traded higher ever since a mixed labour report on Friday stoked uncertainty about whether the Fed would opt for a regular 25 basis-point rate cut or a larger 50 basis-point reduction at its Sept. 17-18 policy meeting, with investors turning to Wednesday’s US inflation data for more cues.
“If that’s the case (higher-than-expected inflation), I would think recent outperforming EM Asia FX like THB could be (more) negatively affected than most due to a high correlation with not only the USD but also the gold price,” said Poon Panichpibool, a markets strategist at Krung Thai Bank.
In the Philippines, July imports rose 7.2% from a year earlier, resulting in the largest trade deficit since March 2023, which could deplete the country’s foreign exchange reserves and increase demand for foreign currencies, putting downward pressure on the peso.
The Malaysian ringgit rose 0.4% and was the outlier among its peers after the country’s industrial production rose 5.3% in July and topped market expectations. The share market in Kuala Lumpur rose 0.4%.
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