The Malaysian ringgit led declines among weak Asian currencies on Friday due to a buoyant dollar while regional share markets were mixed, as investors refrained from taking fresh bets on when the Federal Reserve will start to cut rates.
The MSCI International Emerging Market Currency Index slipped about 0.1%, hovering near a two-month low.
A red-hot inflation print in the United States during the week forced traders to adjust their wagers for a rate cut in June, while Fed officials said overnight that there was no urgent need to ease rates.
The dollar index - a measure of the greenback against six major rivals, was at 105.36 as at 0405 GMT.
“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 analysts said in a client note.
Thai baht, Malaysian ringgit lead Asian FX lower on extended dollar strength
Markets are pricing a near 76% possibility of the Fed staying pat on rates in the June meeting, sharply rising from a 34.2% chance from a week earlier, the CME FedWatch tool showed.
Back in Asia, the ringgit depreciated about 0.4% to trade at 4.765 per dollar, hitting its lowest since late February, while the Taiwan dollar traded 0.3% down and the Philippine peso was flat.
Separately, the Singapore dollar fell about 0.2% to trade at 1.355 per dollar and the South Korean won slipped about 0.8%. Their respective shares fell about 0.2% and 0.8%.
Central banks in both nations kept their respective monetary policies unchanged earlier in the day.
Earlier in the week, the Thailand 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,” analysts from Citi wrote.
“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.”
Among other Asian shares, Manila and Taipei rose about 0.4% and 0.2%, while those in Kuala Lumpur fell 0.2%.
In Beijing, investors await trade data during the day, where March exports likely declined after growing at a better-than-expected pace in the first two months of this year, a Reuters poll showed.
Markets in Bangkok and Jakarta were closed for a public holiday.
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