Most Asian currencies slipped and equities lacked direction on Tuesday, as divisions among U.S. Federal Reserve policymakers weighed on risk sentiment, while South Korean stocks paused their rally on profit-taking.
The MSCI index of global emerging market currencies also traded around three-week lows, as the dollar gauge, which measures the greenback against a basket of major currencies, hovered around three-month highs.
The South Korean won fell 0.7% against the U.S. dollar to log its lowest since October 23, while the Indonesian rupiah declined 0.5% to hit a more than five-week low.
The Thai baht and the Taiwan dollar both lost 0.2%. The Malaysian ringgit shed 0.1% while the Philippine peso was largely unchanged.
Elsewhere, the Mexican peso fell 0.4% on the day, while the Argentine peso weakened 2.3% in the previous session.
Fed officials overnight offered contrasting views on the economy and its risks, even as the absence of official data due to a U.S. government shutdown clouded the outlook.
That left the dollar index anchored just below the 100 mark. The Fed cut rates last week, but Chair Jerome Powell signalled it may be the last reduction this year.
Markets are now pricing in a 65.7% chance of a rate cut in December, down from 94% a week earlier.
“Broad sentiments across Asian markets could be somewhat bearish as market players reduced their expectations for Fed’s rate cuts on somewhat hawkish comments from Fed officials,” said Poon Panichpibool, a market strategist at Krung Thai Bank.
“Reducing Fed’s rate-cut expectations, which has boosted the U.S. dollar lately, continue to hurt the sentiments across Asian FX.”
Divergent views among Fed officials left investors with weak appetite for equities. A blistering rally in South Korean stocks, driven by AI optimism, pushed the KOSPI index to record highs before profit-taking halted the surge.
The benchmark index fell 2.5% on Tuesday but remains up 20% since the start of October, supported by strong tech earnings and easing trade tensions with the U.S.
“KOSPI continues to make fresh highs amid headlines that South Korea could be one of the biggest winners from the AI-narrative, and this should be positive for the won,” Maybank analysts said in a note.
Taiwan’s benchmark fell 1.1% after briefly reaching a record high of 28,554.61 earlier in the day. Singapore’s FTSE Straits Times Index fell 0.7% and Thai stocks dropped nearly 1%, their lowest level since October 22.
Equities in the Philippines rebounded 1.4% after a sharp 3% drop in the previous session. Jakarta shares lost 0.4%, while Kuala Lumpur shares were flat.
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