Emerging Asian currencies edged up on Thursday, as U.S.-China trade tensions and expectations of interest rate cuts by the Federal Reserve subdued the dollar, while regional equities advanced, with Taiwan and South Korea shares reaching record highs.
South Korean won rose 0.3% and Malaysia's ringgit inched up 0.1%. The U.S. dollar index was down 0.2%, as continuing trade friction between the U.S. and China dampened sentiment.
U.S. Trade Representative Jamieson Greer and Treasury Secretary Scott Bessent on Wednesday blasted China's expansion of rare earth export controls. China's commerce ministry defended the controls and called U.S. criticism hypocritical.
"There are risks that the U.S. and China could decouple further, but Greer/Bessent's repeated rhetoric on how the Trump-Xi meeting will go on, mention of an extension of the trade truce suggest that the Trump team is unwilling to escalate tensions even further. That suggests a potential backstop for a complete fall-out in the near-term," Maybank analysts said in a client note.
Investors' increasing confidence in the Fed to cut rates at its next two policy meetings also weighed on the greenback.
Maybank analysts expect the dollar to remain subdued in the near term as political shifts impact the yen and euro and regional central banks intervene to prop up local currencies.
China's yuan firmed to a two-week high after the central bank set its strongest daily midpoint in a year. The Indian rupee rose 0.2%, extending Wednesday's 0.8% gain.
The Reserve Bank of India is estimated to have sold $3 billion to $5 billion in spot and non-deliverable forward markets to support the rupee on Wednesday, traders said, marking its largest intervention in months.
Meanwhile, Trump's comment that Indian Prime Minister Narendra Modi had pledged to stop buying oil from Russia also aided the sentiment towards the rupee.
Regional stock markets advanced in line with Wall Street's gains overnight. South Korea's KOSPI rose 2.5% to a record high, as automakers gained on optimism that the country might reach a trade deal with the U.S. in the near future.
Taiwan shares closed up 1.4%. Chip giant TSMC forecast fourth-quarter revenue up by as much as 24% after market close as it rides an AI boom. It also posted a record profit in the third quarter.
Shares in Bangkok and Jakarta gained 0.3% and 0.9%, respectively.
HIGHLIGHTS:
** Flare-up in US-China trade tensions poses a big risk to Thailand's growth, deputy central bank governor says
** Milei says Argentina, US in talks over trade deal
** Hawkish Bank of Japan policymaker calls for more rate hikes - Reuters
