Bengaluru/Singapore – Asian currencies fell to multi-month lows on Aug 1 with South Korea’s won and Malaysia’s ringgit bearing the heaviest losses as investors left riskier regional assets after the US imposed new tariffs on dozens of trading partners.
The won weakened 0.69 per cent to an over two-month low of 1,401.53 against the US dollar, while the ringgit dropped 0.5 per cent to its weakest since June 23. Both currencies are set for their worst weekly performance since late February and late January, respectively.
Among other currencies, the Taiwan dollar and Thai baht declined more than 0.3 per cent, while the Philippine peso recovered from earlier six-month lows to trade flat.
The Singapore dollar stayed unchanged against the greenback at 1.2977 as at 2.53pm, with no change to the current 10 per cent baseline tariff on the Republic’s exports to the US.
The US dollar index – a measure of the value of the greenback relative to a basket of foreign currencies – rose 0.3 per cent on Aug 1 on greater clarity around US trade policies.
The dollar index has climbed 2.5 per cent this week to two-month highs.
The MSCI emerging market currency gauge fell more than 1 per cent this week, abruptly ending a six-month rally in July and highlighting the vulnerability of regional assets to trade policy shifts.
Regional stock markets showed mixed performance, with Kuala Lumpur and Jakarta shares rising more than 1 per cent, while Seoul tumbled 3.5 per cent after the government proposed rolling back recent tax cuts.
Late on July 31 in Washington, US President Donald Trump signed executive orders imposing tariffs ranging from 10 per cent to 41 per cent on US imports from dozens of countries, utilising emergency powers and pressuring foreign leaders ahead of his self-imposed Aug 1 deadline.
India faces 25 per cent tariffs on its US-bound exports, Taiwan 20 per cent, Thailand and Malaysia 19 per cent, while South Korea secured reduced 15 per cent rates after intensive negotiations.
Vietnam, Indonesia, the Philippines, Japan, and Cambodia have already secured agreements.
“Tariff rates settling at 15 per cent to 20 per cent for most of the region outside of China will hurt producers, narrow profit along the supply chain and curtail US demand,” said Mr Alex Holmes, regional director for Asia Pacific at Economist Intelligence Unit, noting that core emerging market countries with stronger fundamentals are expected to prove more resilient than frontier economies.
The broad-based tariff structure leaves emerging markets “between a rock and a hard place”, forcing difficult choices between China and US trade relationships as they seek alternative strategies to mitigate economic fallout, Mr Holmes added. REUTERS
