BENGALURU: Emerging Asian currencies fell against a resurgent dollar on Friday while stocks retreated, as investors reassessed their positions after the US Federal Reserve signalled a more calibrated approach to further monetary policy easing.
Stock markets in developing Asia were broadly on the back foot. The MSCI gauge of EM Asia equities fell 0.6 percent but held just below a four-year peak.
Singapore’s FTSE Straits Times drifted lower for sixth consecutive session after reaching a record high on September 12, and stocks in Taiwan and South Korea slipped from record peaks scaled the previous day.
However, most equity benchmarks in the region were headed for weekly gains, largely because of the recent rally to record or multi-year highs in the run-up to the Fed’s rate verdict.
A dovish Fed has given Asian central banks greater flexibility to ease monetary policy without triggering currency pressures, thereby supporting growth and further boosting investor risk appetite.
The MSCI EM Asia index advanced roughly 1 percent this week, while stocks in Indonesia and the Philippines were set to add 2 percent and 3 percent, respectively.
“The Fed signalling a rate cut cycle should continue to support risk appetite, so long as US data does not materially deteriorate from here,” wrote Nomura analysts led by equity strategist Chetan Seth.
“We think valuations of larger Asian markets are on the higher side, but not yet at extreme levels.”
EM currencies were broadly lower against the dollar, with an MSCI index of global EM units slipping for a second consecutive day after reaching a 10-week high earlier in the week.