A buoyant dollar pushed most emerging Asian currencies lower on Friday, with the South Korean won and Malaysian ringgit leading declines, while regional equity markets fell as investors refrained from taking on fresh bets due to uncertainty around the timing of US rate cuts.
The MSCI International Emerging Market Currency Index slipped about 0.2 percent , hovering near a two-month low.
A red-hot US inflation printduring the week forced traders to adjust their rate cut wagers, while Federal Reserve officials saidovernight that there was no urgency to ease rates.
The dollar index – a measure of the greenback against six major rivals – was at 105.66.
“Although we have been in the bullish USD camp …. it has turned out to be more robust than we expected, especially against Asian currencies,” HSBC said in a note.
Markets are pricing a near 75 percent possibility of the Fed staying pat on rates at its June meeting, sharply rising from a 46.8 percent chance last week, the CME FedWatch tool showed.
In Asia, the ringgit fell about 0.5 percent to trade at 4.767 per dollar, its lowest level since late February, while the Taiwan dollar Philippine peso and the Indian rupee traded between 0.1 percent and 0.2 percent lower.
Separately, the Singapore dollar fell about 0.4 percent to 1.358 per dollar, hitting its lowest since mid-November, and the South Korean won slipped about 0.8 percent . Their equity markets lost about 0.2 percent and 0.9 percent , respectively.
Central banks in both countries kept their monetary policies unchanged earlier in the day.
Earlier in the week, the Thai and Philippine central banks had kept their policy rates steady, with the former warding off repeated government pressure to slash rates to shore up the economy.
“The Fed is now in a difficult position, and the market is questioning if there will be any cuts in 2024, suggesting more upside for US rates,” according to analysts from Citi.
“While EM (emerging markets) central banks can cut rates even with the Fed on hold, a regime of higher US rates is very difficult for EM rates.”
