Asian currencies eased on Tuesday, with the Indonesian rupiah and Philippine peso losing most, as traders weighed the risk of a broader tariff war and reassessed the trajectory of U.S. interest rate cuts.
The peso declined by 0.4% to 58.23 per U.S. dollar, while the rupiah logged its worst day since February 10, slipping 0.4% after a four-day rally.
The dollar index, which gauges the U.S. currency against six major counterparts, rose by 0.2% to 106.9, following a three-session losing streak amid uncertainty over U.S. President Donald Trump's tariff plans.
The greenback was bolstered by Federal Reserve Governor Christopher Waller's support for maintaining current monetary policy until inflation eases, after data showed U.S. consumer prices rising at their fastest rate in nearly 18 months in January, reinforcing the Fed's stance against hastily cutting rates.
"Markets have been positioning for tariff trade (i.e. long USD) but the repeated delay in Trump tariffs have frustrated USD bulls thus far," said Christopher Wong, a currency strategist at OCBC.
However, the ongoing delay to U.S. tariffs, potential peace negotiations over Ukraine, underperforming U.S. economic indicators such as retail sales, and a reassessment of Chinese tech stocks due to initiatives like DeepSeek are creating a favourable environment for risk assets to recover while the dollar retreats, Wong said.
In Indonesia, the country's central bank is widely expected to hold rates steady to curb weakness in the currency when it meets on Wednesday, according to a Reuters poll, suggesting global headwinds could limit the central bank's ability to ease rates this year. The rupiah has fallen more than 1% since the start of the year.
Last Thursday, the Bangko Sentral ng Pilipinas unexpectedly kept its key interest rate steady on Thursday, with Governor Eli Remolona citing uncertainties over global trade policies. The peso has extended losses since Remolona's comments.
In Singapore, the government is set to unveil its budget later in the day, prioritising living costs and jobs, following recent data indicating that the economy expanded faster than projected at the end of 2024.
The Singapore dollar fell 0.2%, while equities inched up 0.2%.
Meanwhile, in Thailand, the baht extended losses to fall 0.2% after data showed that the country's economy grew more slowly than expected in 2024.
Equities in the region largely traded higher, with those in Manila and Jakarta adding more than 1.3% and 0.7%, respectively.
Shares in Seoul and Shanghai added 0.6% and 0.3%, respectively.
HIGHLIGHTS:
** Japan's GDP beats forecasts as consumption, business spending perk up
** China's current environment conducive to private economy, state planner says - Reuters
