BENGALURU: Asian currencies advanced on Thursday as the dollar weakened amid worries over the US Federal Reserve’s independence, while investors turned their attention from easing Middle East tensions to regional and trade risks.
Stocks in the region traded mixed, with South Korean shares sliding more than 2% as investors locked in profits following a strong post-election rally.
On the other end, equities in Thailand were up 0.4%, while those in Malaysia advanced by 0.3%.
Investors are now shifting their focus from geopolitical risks in the Middle East, which kept markets on edge much of this week and last, to rising trade tensions as the July 9 deadline for the 90-day pause on reciprocal tariffs approaches.
The key downside risk lies in the short timeframe before reciprocal tariff suspensions expire, with uncertainty over their extension, which could introduce volatility and reverse current sentiment quickly, RHB analysts wrote.
Globally, concerns over the Federal Reserve’s independence dented confidence in US monetary policy and sent the US dollar lower, after a media report said President Donald Trump had considered replacing Fed Chair Jerome Powell by September or October.
The weakness in the dollar gave Asian currencies a lift, with the Thai baht inching up 0.5%, a day after the Bank of Thailand (BoT) kept its interest rates unchanged.
Alan Lau, an FX strategist at Maybank, said the BoT’s dovish tone and a softer dollar are keeping rate cut hopes alive, supporting Thai bonds and paving the way for baht strength through the year.
Thailand, already grappling with weak consumption, mounting household debt and a tourism slowdown, now also faces escalating political uncertainty and the risk of steep US tariffs on its exports if a deal is not struck before a July deadline.
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