Asia FX gains on respite from dollar strength, equities rally

ASIAN emerging market currencies recovered some lost ground on Thursday, with the South Korean won gaining the most, as the greenback consolidated gains with investors slowly adapting to expectations of U.S. interest rates staying higher for longer.

The won advanced over 1% and the Philippine peso rose 0.4% against the dollar, both currencies marking their biggest single day percentage gain since March 21.Emerging markets have taken a beating this week, with currencies still near multi-month lows, after global investors readjusted bets on the timing of any monetary policy easing from the Federal Reserve as strong U.S. data and statements from policymakers indicated the war against inflation is not over.

The Indonesian rupiah, worst performer so far this week, has already lost more than 2% after Fed comments added to the dollar's safe-asset appeal and triggered a risk sell-off. Indonesia's high-yielding bond market has also lost appeal due to currency volatility and the wafer-thin spreads it offers over dollar markets, with market participants now pricing in the possibility that Bank Indonesia will start hiking rates.

"We think a hike is likely to have more value in terms of its signalling effect rather than its immediate impact on the IDR. Rate cuts will likely only start in Q1 25," Barclays analysts said in a note.

Asian Currencies Ringgit Bank Indonesia Interest Rates Federal Reserve Monetary Policy

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