Asian currencies eyes monthly losses as US tariffs loom

BENGALURU: Emerging Asian markets were mixed on Friday, while currencies got a breather as the US dollar dipped, but many assets, especially in South Korea and Indonesia, were set for their worst performance in months due to the threat of US tariffs.

Since Donald Trump won the US elections in early Nov, the dollar has rallied, weighing on emerging market currencies, while stock markets have been hit by Trump’s recent pledge for 25% tariffs on key trading partners, including China, a major trading partner for Asian economies.

South Korea is among the worst hit as it has close trading ties with the US and China.

Its stocks closed 2% lower on the day and have slid 3.9% in November, the most in any month since January. The won was flat on the day, but has lost 1.2% this month and 7.7% this year, among the worst hit in the region.

The central bank unexpectedly cut interest rates for a second consecutive meeting on Thursday as economic growth faltered, with policymakers keeping a wary eye on trade risks.

Over in Indonesia, the rupiah was largely unchanged on the day and down 1% for November, among the least in the region. The stock market was hit harder, tumbling 5.8% this month and heading for its worst month in over four years.

Investors are also worried as the country’s consumption growth is still below 5%, said Fakhrul Fulvian, an economist at Trimegah Securities.

Maybank analysts said in a note that they are monitoring the developments in local elections, while remaining cautious on the dollar-rupiah pair due to uncertainties, including over US policies.

The Thai baht and the Malaysian ringgit rose 0.5% and 0.2%, respectively, on the day as the dollar dipped, largely on the back of a rally in the Japanese yen.

Nonetheless, both Southeast Asian currencies were headed for their second consecutive month of declines.

The headwinds for Asian currencies could continue in 2025, said Ken Cheung, Chief Asia FX Strategist at Mizuho Bank.

“We look for more two-way volatilities in Asian FX as the actual tariff hikes could come lower than expected, considering the reflation risk in the US”

Equities in the Philippines retreated 0.1% on the day and their roughly 7% drop this month is set to be the steepest since September 2022.

Elsewhere, Brazil’s real hit a lifetime low on Thursday after the government’s proposed income tax reform sparked a bruising selloff, while the Mexican peso edged 0.2% lower.