BENGALURU: Most Asian currencies were muted on Thursday, while equities struggled to make headway, as investors digested a dim economic outlook from the region’s largest economy coupled with paring back of bets on early rate cuts in the United States.

The MSCI emerging markets currencies index hovered near a one-month low, as of 0650 GMT.

The dollar index, which measures the greenback against six major rivals, was perched at 103.2.

Investors maintained a cautious stance following weak economic data from China, Asia’s largest trading partner, showing the persistent pressure of a protracted property crisis and subdued demand.

The yuan was flat, while Chinese stocks fell as much as 2.6% to hit almost a three-year low.

Stronger US retail sales data showed that the Federal Reserve may not quickly move to slash interest rates, with the CME FedWatch tool now showing a rough 60% chance of a rate cut in March, down from about 70% previously. The South Korean won was the lead gainer for the day in the region, rising as much as 0.3%, although it lingered near its November lows. The Taiwan dollar reversed gains to end flat.

“Asian currencies, mainly the Korean won and Taiwan dollar have seen quite a tear of late, given the less favourable mix of sell-off in equities, higher yields, China growth concerns and geopolitical risks,” said Christopher Wong, a currency strategist at OCBC.

Wong, however, sees a return of portfolio inflows into Asia as central bank pivots are still expected this year.

Citi analysts estimated there was a combined $5.2 billion of net capital outflows in Asia due to a dollar short squeeze, particularly from Taiwan, South Korea and China, the largest since China’s COVID-19 lockdowns and the Russia-Ukraine conflict’s escalation in March 2022.