Asian stocks, FX weakens

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BENGALURU- The Philippine peso and Indonesian rupiah led declines among Asian currencies on Friday, extending recent losses on bets the US Federal Reserve will slow rate cuts, while regional stocks were mixed on uncertainty about the US election outcome.

The peso fell 0.7 percent to 57.92 per US dollar, a level last seen on Aug. 2, while the rupiah was down 0.4 percent.

The Malaysian ringgit reversed course to trade 0.2 percent higher, after edging down 0.1 percent earlier and on track for fourth straight week of declines, its longest such run in a year.

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The dollar index was largely unchanged at 104.04, after reaching a three-month high of 104.57 earlier this week. The index is on track for a 3.6 percent gain since the week ended Sept. 23, and poised to record its strongest weekly performance since Sept. 30.

The greenback strengthened as investors revised interest rate cut expectations and factored in a potential second Trump presidency, which could bring inflationary policies, slower rate cuts, and pressure on trading partners’ currencies.

The market was completely pricing in a cut of at least 25 basis points a month ago, with a 58.2 percent chance of a 50-bp cut, according to CME’s FedWatch Tool.

“As the US elections approach and Trump trades are being implemented, the dollar is likely to remain on the front foot and the US rates are likely to remain elevated, creating a somewhat painful backdrop for EM assets,” analysts at Barclays said.

The rupiah has fallen 1.1 percent this week, set for its worst week since Sept. 30.

However, the reappointment of Sri MulyaniIndrawati as the finance minister in the newly sworn-in President Prabowo Subianto’s cabinet – signals policy continuity to investors.

The Thai baht has fallen nearly 1.5 percent this week and slipped as much as 0.5 percent earlier in the day, before recouping some losses to trade 0.3 percent lower.

Bank of Thailand Deputy Governor Piti Disyatat told Reuters in an interview that the country’s low and well-anchored inflation poses no risk of deflation.

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