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% to 57.92 per US dollar, a level last seen on Aug. 2, while the rupiah was down 0.4%, as of 0646 GMT.
The Malaysian ringgit reversed course to trade 0.2% higher, after edging down 0.1% earlier and on track for fourth straight week of declines, its longest such run in a year.
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% 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% 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% this week, set for its worst week since Sept. 30.
However, the reappointment of Sri Mulyani Indrawati 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% this week and slipped as much as 0.5% earlier in the day, before recouping some losses to trade 0.3% 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.
The Korean won declined up to 0.6% to its lowest level since July 19. Local media reported South Korea’s finance minister had flagged risks to growth forecasts.
Stocks in Bangkok were up 0.2% but were on track for their worst week since early June, down nearly 1.8%. Singapore equities fell 0.5% and were set for their biggest weekly loss since early August.