BENGALURU: Asian currencies and equities were largely subdued on Friday, with Thailand’s baht and South Korean won leading declines, as increasing scepticism over whether the US Federal Reserve is done with interest rate hikes kept risk appetite in check.
The baht depreciated as much as 0.5% to its lowest level since Nov. 16. The unit reversed last week’s gains to lose nearly 1% in value so far this week.
The won depreciated as much as 0.5% while the Malaysian ringgit and Indonesian rupiah were marginally down 0.2% and 0.1%, respectively.
With US markets closed on Thursday and due for a shorter trading session on Friday for Thanksgiving, currencies are likely to trade in narrow ranges but with some volatility as liquidity is expected to remain thin.
The US dollar index eased 0.029% to 103.73, staying close to the 2-1/2-month low of 103.17 it touched earlier this week.
Markets have dialled back expectations of Fed rate cuts in 2024 after data in the US released on Thursday hinted at a still-tight labour market in the world’s largest economy.
“We maintain our preference to sell the USD on rally, with Asian currencies likely having a larger runway than the majors to gain against the greenback,” analysts at Maybank wrote.
MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.4% but is headed for a weekly gain of 0.9%. It is up 7.1% so far in November.
“While market participants are expected to remain in a wait-and-see mode until the FOMC (Federal Open Market Committee) meeting on December 12-13, I believe the likelihood of a significant sell-off in Asian currencies, including (the Indonesian rupiah), has diminished,” analysts at Sumitomo Mitsui Banking Corp wrote.
The rupiah has lost over 0.5% this week, highlighting a recent downward trend that even led Bank Indonesia to put forth a surprise 25 basis point rate increase on Oct. 19 aimed at nudging the local unit higher.
In Taiwan, the opposition parties rushed to register their candidates for president with hours to go before a deadline, after talks on running a joint ticket collapsed dramatically on live television amid bitter arguments.
“It now appears unlikely that consensus can be reached before the candidate registration deadline today, and this could disappoint investors hoping for a potential easing in cross-straits tensions,” an analyst at DBS said in a note.
The Taiwanese dollar and equities in the country traded largely flat.
In South Korea, the won has lost 3.2% against the dollar so far this year.
“Geopolitical tensions in Korea are not new, but they could keep a check on KRW gains for the time being,” analysts at DBS said.