BENGALURU: Asian stock markets fell on Friday after a US federal court kept President Donald Trump’s tariffs in effect, while currencies also weakened, although both assets were headed for monthly gains.
The Thai baht fell 0.4% and the South Korean won dropped 0.7%.
The Malaysian ringgit and the Singapore dollar dipped 0.1% and 0.2%, respectively.
A federal appeals court temporarily reinstated Trump’s tariffs while it considers the government’s appeal, a day after a trade court blocked tariffs on the grounds that the president had exceeded his authority.
The dollar index weakened earlier but was last 0.2% higher. It was poised for its fifth consecutive monthly decline.
The “bounce in the USD is seen as short-term unwinding of short positions rather than bullish reversals to chase,” said Fiona Lim, a senior FX strategist at Maybank.
Trump’s tariff policy reversals and concerns over US fiscal health have prompted investors to shun the dollar and favour Asian currencies this month.
While tariffs risk lingers, the news flow and cautious positioning are supportive for emerging assets, said Barclays analysts.
MSCI’s emerging market currencies index has gained more than 2% in May, the most in any month since November 2023.
The baht is set for its best month since September 2024, and the Singapore dollar is poised for a fifth consecutive monthly gain.
The won has jumped about 3.4% this month as Seoul officials confirmed currency policy was on the table during recent trade talks with US counterparts.
In Taiwan, closed on the day for a holiday, the dollar surged 6.5% against the US dollar in May, with most of that coming early in the month on speculation that Washington had asked for that to happen as part of the tariff talks, which Taiwan has denied.
The focus across the region now is on developments in trade negotiations leading up to the Trump-imposed July 9 deadline.
“Any trade deal or signs of tensions easing could continue to spur unwinding of short USD positions and keep the USD/AXJ mostly supported on dips in the near term,” Maybank’s Lim said.
Lim sees a possibility for a virtuous circle for Asian currencies, especially with a bearish dollar allowing regional central banks to further lower interest rates to boost growth.
MSCI’s gauge of Asian emerging market equities fell 0.9% on the day on the latest twist in the tariffs saga.
However, the index has jumped 5% this month, largely due to the trade deal between the US and China, a major trading partner for many Southeast Asian countries.
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