Asian currencies, including the Malaysian Ringgit and Indonesian Rupiah, experience losses in foreign exchange (FX) markets.
On Wednesday, most Asian currencies faced pressure due to ongoing trade war fears and global economic uncertainty. The ongoing concerns over an upcoming U.S. tariff deadline and potential shifts in U.S. trade policy, particularly if former President Trump returns to office in 2025, have increased risk aversion among investors, benefiting safe-haven assets like gold while pressuring Asian export-linked currencies.
The Malaysian ringgit and Indonesian rupiah were among the currencies under pressure, with the ringgit declining by 0.4% and the rupiah declining by 0.3%. The South Korean won and Hong Kong dollar were relatively flat, but the retreat in mega-cap tech shares affected South Korea's market, a trend that spilled over to peers in the region.
In contrast, the Taiwan dollar performed differently by strengthening amid this environment. Taiwan’s economic resilience amid geopolitical and trade tensions has made its currency more attractive compared to others in the region. The stable economic fundamentals and investor confidence in its relatively open capital account and independent central bank have supported the Taiwan dollar's strength.
The US labour market showed a rise in job openings for May, and the US non-farm payrolls report will be closely monitored for prospects of Fed interest rate cuts. Market strategist Poon Panichpibool stated that market players are in a wait-and-see mode until the release of the US non-farm payrolls data on Thursday. Federal Reserve Chair Jerome Powell stated that the central bank would wait for clarity on tariffs' impact before easing.
The US Senate passed a sweeping tax-cut and spending bill, adding $3.3 trillion to the national debt. The US dollar was softer on Wednesday, near levels last seen in February 2022. The Thai baht also felt the impact of the constitutional court suspending Prime Minister Paetongtarn Shinawatra pending a case seeking her removal on allegations of dishonesty and ethics breaches. Thailand's market declined by 0.4% a day after the court's decision.
This divergence between the performance of most Asian currencies and the Taiwan dollar highlights how specific regional fundamentals and policies can impact currency performance differently under broad global pressures. Asian equities had a mixed performance on Wednesday, with some markets like Taiwan's seeing an increase of 0.4% despite the impact of the retreat in mega-cap tech shares.
The prospect of Fed interest rate cuts, as indicated by the US labour market's job openings rise and the forthcoming US non-farm payrolls report, could potentially stimulate an increase in business activities, but it might also increase the debt for those countries that are closely tied to the US finance industry. The divergent performance of the Taiwan dollar, strengthening amid global economic uncertainty, and other Asian currencies, such as the Malaysian ringgit, Indonesian rupiah, and Thai baht, which are under pressure, underscores the significance of a nation's economic resilience and policies in influencing its industry and currency performance within a broader global context.
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