Asian currencies were subdued on Wednesday and regional equities were mixed, as investors warily awaited U.S. President Donald Trump's Federal Reserve nominations while eyeing mounting evidence that tariffs are crimping U.S. economic growth.
The Philippine peso and South Korean won fell more than 0.2%, while Taiwan's dollar, Thai baht and Indonesian rupiah traded flat.
The dollar index was range-bound against a basket of currencies as traders continued to price in a more than 90% chance of a Fed rate cut in September.
In regional equity markets, Taipei and Seoul slipped 0.8% and 0.3%, respectively. Manila stocks added over 0.6%, extending gains after Philippine inflation hit its lowest in nearly six years, potentially opening room for rate cuts.
Bangkok shares advanced over 1% for a third straight session, marking their highest level since February 20.
Trump said on Tuesday that he will decide on a Fed board nominee by the end of this week while narrowing replacements for Fed Chair Jerome Powell to four candidates.
The announcement coincided with U.S. services activity flat-lining in July as input costs surged, highlighting the adverse impact of Trump's aggressive tariffs on businesses.
While tariffs dominated first-half market sentiment, they paradoxically boosted Asian growth through export front-running, with positive second-quarter GDP surprises from Indonesia, Taiwan, Singapore and Vietnam, while China exceeded targets at 5.3% year-over-year, said Lin Li, Asia Head of Global Markets Research at MUFG.
However, the outlook is shifting as ASEAN and India face steep U.S. tariff increases from early August, she added.
Markets are also uncertain over China, which is facing an August 12 deadline to reach a durable tariff agreement with the U.S. administration.
Without a deal, global supply chains could face renewed turmoil from U.S. duties snapping back to triple-digit levels that would amount to a bilateral trade embargo that would inflict heavy collateral damage across the region.
Trump threatened on Monday to impose even higher tariffs on Indian goods over New Delhi's Russian oil purchases and said on Tuesday he will decide on sanctioning countries buying Russian oil after a Wednesday meeting with Russian officials.
India faces 25% tariffs, the steepest rate among major Asian economies after China, while South Korea negotiated down to 15%.
The rupee was largely unchanged, while Mumbai stocks gave up 0.2% after the country's central bank held interest rates steady in a widely expected move, though analysts expect more easing to come as the impact of U.S. tariffs becomes clearer.
Malaysia announced plans to spend up to $150 billion over five years buying U.S. equipment for semiconductor, aerospace and data centre sectors as part of a tariff-reduction deal with Washington.
For Asia, MUFG's Li said it favours currencies of countries with less exposure to the U.S. and China, such as the Indonesian rupiah, while currencies with larger exposure such as the Vietnamese dong, will likely underperform.
HIGHLIGHTS:
** Thai July headline CPI falls 0.7% y/y, more than forecast
** China's export growth likely slowed in July - Reuters
