Asian currencies eased on Friday as the dollar gained after U.S. President Donald Trump said he would soon nominate his choice to head the Federal Reserve, while Indonesian stocks recovered following regulators' reforms to tackle downgrade warnings.
Stocks in Jakarta gained 1.2%, a day after authorities took steps to allay MSCI's concerns about share ownership and trading transparency that prompted its warning of a possible downgrade to "frontier" market status.
The benchmark was on course for its biggest weekly fall in 11 months after slumping more than 8% on Wednesday and Thursday, while the stock exchange chief resigned on Friday, taking responsibility for the situation.
"Indonesia's rapid and coordinated response underscores strong regulatory commitment and growing market maturity," said Andrey Wijaya, research head at RHB Indonesia. With measures such as clarity on free floats, disclosure of ultimate beneficial owners, and a 15% free-float threshold, authorities are tackling credibility gaps without undermining market stability, he added.
"While the announcement has supported a rebound in the JCI ... we see that market volatility is likely to persist until MSCI releases clearer guidance on its revised methodology for Indonesia."
The rupiah edged down 0.2%, as the market slump piled pressure on currency already reeling from concerns over fiscal health and the independence of the central bank.
Other Asian currencies also retreated as the greenback rose after Trump said he would name his pick to replace Fed Chair Jerome Powell on Friday, following reports that former Fed Governor Kevin Warsh visited the White House.
"The surprise swing to Warsh caught markets off-guard, triggering off broad unwinding of cross-asset, including precious metals, cryptoassets, equities, while USD rebounded," said Christopher Wong, a currency strategist at OCBC.
Asian currencies that racked up sharp early-year gains are likely to face some near-term roadblocks, and rapid shifts in positioning boost risks for intermittent consolidation or retracement, Wong added.
Factors from Washington's desire for a weaker currency to Trump's erratic policymaking had pressured the dollar earlier this month, boosting regional currencies.
The Malaysian ringgit fell 0.3% on Friday, but was poised for a monthly gain of nearly 3%, its best since September 2024. It has benefited form robust economic fundamentals and optimistic growth prospects, along with broad dollar weakness.
The Singapore dollar slipped 0.2% on the day, but was set to post its best monthly gain since June 2025.
Stocks in the region were mixed. South Korea's KOSPI was set to end the week at a record, while Taiwan stocks dropped 0.9%. Thanks to an AI-driven rally, both tech-heavy markets are set for bumper monthly gains.
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