BENGALURU: Emerging Asian currencies got a leg up on Friday due to a weakened dollar, while stocks in the region were mixed after slightly weaker US labour data pushed up bets for a smaller Federal Reserve rate cut.
The South Korean won was among the lead gainers, rising about 0.5% after the Bank of Korea kick-started its policy easing cycle with a 25-basis-point cut, joining Indonesia and the Philippines.
The Indonesian rupiah, Philippine peso, Thai baht and the Malaysian ringgit traded nearly flat to 0.4% higher.
The dollar was set for its second straight weekly gain after a stronger jobs report reinforced bets on a smaller rate cut from the Fed, leading to outflows from riskier Asian assets.
However, what cemented bets on a 25-bps cut in November was the higher weekly jobless claims report, which overshadowed a slightly hotter inflation print.
Markets are currently pricing in an 84.3% chance of a 25-bps cut, according to the CME Fedwatch tool.
The rupiah lost more than 1% on the week, hovering near a two-month low. The baht and ringgit were also poised for weekly losses.
“The broad dollar has rebounded from the past few weeks’ decline, which makes us more cautious that the previous out-performance in MYR and THB may have room to retrace,” Citi analysts said in a note.
“We are also turning more selective in high yielders because the mutual reinforcement of lower rates and portfolio inflows may be also coming to a pause,” they added.
Citi analysts estimated outflows from Indonesia and Thailand totalled $329 million and $221 million respectively, while India saw large foreign selling of about $5.2 billion last week.
Investors will be reassessing the rate cut trajectories in Asia as a slew of economic growth data and inflation prints, as well as central bank meetings, are due in the upcoming week.
Analysts predict the Philippines will move forward with a 25-bps cut, while others such as Thailand, Indonesia and Singapore may stand pat.
The Reserve Bank of India held rates this week, but kept the doors open to cutting rates as early as December.
The rupee slipped below the 84 per dollar mark on Friday, dropping to a record low.
Among Asian equities, Jakarta, Bangkok, and Taipei rose between 0.4% and 1.1%, while shares in Manila and Mumbai fell 1.3% and 0.3%, respectively.
Stocks in Seoul, which rose about 0.5% initially, pared all their gains to trade flat.
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