The Malaysian ringgit and Thailand’s baht led losses among subdued Asian currencies on Friday, as a firmer dollar weighed on sentiment, while regional shares steadied after a US-UK trade deal sparked hopes for broader diplomatic progress.
The ringgit fell as much as 1.1% to 4.322 per dollar, its weakest point since May 2, snapping a five-week winning streak with a sharp weekly decline of nearly 3%.
The currency weakened as Malaysia’s central bank held interest rates steady on Thursday but flagged risks of slower economic growth amid trade tensions, prompting analysts to forecast potential rate cuts later this year.
The ringgit’s sharp surge past 4.20 against the dollar earlier this week appears overdone and due for a correction, as improving liquidity and China’s stronger-than-expected yuan fixing weigh on broader regional currency momentum, said Christopher Wong, FX strategist at OCBC.
The Thai baht slipped 0.6% to also touch its lowest level since May 2.
The dollar index strengthened for a third consecutive session, up 0.6% so far this week, after a US-UK trade deal lifted optimism ahead of Sino-US talks and as the Federal Reserve tempered expectations for rate cuts.
Markets head into the weekend, with focus squarely on trade negotiations between Washington and Beijing, set to begin on Saturday in Switzerland.
Asian currencies have experienced sharp swings recently, with Taiwan’s dollar posting a historic 6% two-day surge before stabilizing again.
The currency traded flat on Friday, but was on track for a weekly gain of 2.5%.
Malaysia’s ringgit leads Asian FX losses ahead of BNM rate decision
The South Korean won gained as much as 0.6% in early hours but is currently trading flat. For the week, the won has fallen by around 0.5%.
“Taiwan, Singapore and South Korean currencies are poised to strengthen against the dollar due to capital repatriation from domestic investors,” BCA Research analysts wrote, adding this trend “is less pertinent to India, Indonesia, and the Philippines given their large foreign portfolio liabilities.”
Regional equities steadied, with Manila and Taipei up 1.2% and 1.6% respectively, while Singapore and Jakarta added 0.5% and 0.4%.
Indian shares slipped 0.6% while the rupee was flat after cross-border tensions with Pakistan escalated, with blasts reported in Jammu amid drone and missile attacks.
Both countries saw their financial assets decline on Thursday, with Pakistan’s benchmark index closing down 5.9%.
The MSCI emerging market currency index was flat but on track for a fourth straight weekly gain.
Its Asian equities counterpart rose 0.4%, but was set to snap a four-week winning streak with a 0.6% weekly loss.
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