Asian currencies and equities were largely subdued on Friday, with Thailand’s baht and South Korean won leading declines, as increasing skepticism 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 percent to its lowest level since Nov. 16. The unit reversed last week’s gains to lose nearly 1 percent in value so far this week.
The won depreciated as much as 0.5 percent while the Malaysian ringgit and Indonesian rupiah were marginally down 0.2 percent and 0.1 percent , 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 percent to 103.73, staying close to the 2-1/2-month low of 103.17 it touched earlier this week.
Markets have dialed back expectations of Fed rate cuts in 2024 after data in the US released on Thursday hinted at a still-tight labor 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 percent but is headed for a weekly gain of 0.9 percent . It is up 7.1 percent 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 percent this week, highlight ing 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. – Reuters