Most Asian currencies lost ground on Friday and were set for weekly losses, as the dollar strengthened further on prospects of fewer Federal Reserve rate cuts, while investors braced for U.S. President-elect Donald Trump's return to the White House.
MSCI's index tracking EM currencies was near five-month lows and set for a fifth straight weekly loss.
The Philippine peso and the Malaysian ringgit dropped 0.3% and 0.4%, respectively, on Friday.
The Thai baht was down 0.1%, while the Singapore dollar inched 0.1% higher. Both the currencies were on track for their biggest weekly drop since early November.
The Taiwan dollar was down 0.1%, trading near a five-month low. The dollar, which began the New Year on a strong note reaching a more than two-year high against major peers, was on track for its best weekly performance in over a month.
The possibility of U.S. rates staying higher for longer has boosted the dollar and also raised the risk of stark rate differentials between the U.S. and emerging economies that could spur capital outflows.
Moreover, ahead of Trump's inauguration on Jan. 20, markets have stayed cautious due to uncertainty over his plans for hefty import tariffs, tax cuts and immigration restrictions, which have lent further support to the dollar.
The "U.S. exceptionalism" theme under Trump could be the main theme for 2025, which could continue to support the dollar, said Poon Panichpibool, a markets strategist at Krung Thai Bank.
"EM assets would underperform under such conditions and I would expect Q2-Q3 to be the periods that we could witness the weakest level for EM FXs," Panichpibool said.
The South Korean won was up 0.2% after a 12-day losing streak, while stocks soared 2.2% after the country's acting president ordered financial agencies to deploy market-stabilising measures.
Stocks in Taipei and Bangkok were up 0.9% and 0.2%, respectively, after falling sharply in the previous session.
Manila shares jumped 1% to a two-week high. China stocks dropped 0.5%, extending a fall from Thursday on growing worries about the domestic economy and a possible looming trade war with the U.S.
HIGHLIGHTS:
** China's central bank likely to cut rates in 2025, FT reports
** Philippine central bank sees wider current account deficit in 2024
** South Korea authorities enter impeached President Yoon's compound in arrest attempt - Reuters
