Asian FX slips as Fed jitters, upcoming rate decisions keep investors wary

Asian currencies slipped on Thursday, led by the South Korean won and Malaysian ringgit, as a mildly hawkish interpretation of the US Federal Reserve minutes and upcoming rate decisions in Indonesia and the Philippines kept investors cautious.

Trading volumes improved as most Asian markets reopened after the holidays, although China and Taiwan remained closed.

Overnight, investors assessed minutes from the Federal Open Market Committee (FOMC), which indicated policymakers were in no rush to cut interest rates, with several members open to further hikes if inflation remains persistent.

MSCI’s emerging market currency index shed 0.2%, touching its lowest level since February 11.

 The South Korean won weakened 0.5% to a one-week low, while the Malaysian ringgit fell 0.4%, also touching its weakest level in a week.

“The Korean won and Indonesian rupiah are leading losses as carry trades unwind and persistent capital outflows amplify downside pressure,” said Glenn Yin, director of research at AC Capital Market.

In line with the broader weakness across Asian currencies, the Indonesian rupiah declined 0.3%, hitting its lowest point since January 21.

Investors will be looking at Bank Indonesia’s interest rate decision, due later in the day, where the central bank is broadly expected to hold rates steady for a fifth consecutive meeting.

Asian currencies: Ringgit strengthens as thin holiday trade keeps markets muted

“For BI, the tone of the statement will be important given the continued mixed views among participants emerging from the FOMC minutes and recent Indonesia-related macroeconomic headlines,” said Lavanya Venkateswaran, senior ASEAN economist at OCBC Bank.

The Philippine central bank is also due to deliver its policy decision later in the day, with markets expecting a 25-basis-point rate reduction. The Philippine peso was flat ahead of the meeting.

Most regional stock markets were trading in the green, with the MSCI gauge of emerging Asian equities rising 0.6%, hitting its highest level in nearly a week.

 South Korean stocks led regional gains, rising 2.7% to a record high, supported by strong advances in index heavyweights.

Thai stocks climbed more than 1% to hit their highest point since early November 2024, while stocks in Singapore gained as much as 1.2% to touch a one-week high.  “Equities are benefiting from renewed risk appetite as investors focus on resilient earnings and structural growth themes like AI, even as currencies soften,” AC Capital’s Glenn said.

Malaysian stocks rose 0.5% while stocks in Jakarta gained 0.4%.