CURRENCY - SINGAPORE. Most Asian currencies posted weekly losses on Friday, as investors weighed shaky recovery in the world's second-largest economy and dwindling prospects of early interest rate cuts in the United States.
The Thai baht traded flat on Friday, but was down about 1.8% for the week in what could be its biggest weekly fall since Aug. 4, 2023. The Malaysian ringgit was also muted for the day, but down 1% for the week.
Trading was thin in Asia with Chinese markets closed for the Lunar New Year break. Markets in Indonesia, Taiwan and South Korea were also closed.
China was in the limelight during the week with authorities announcing a slew of measures to arrest the decline in the country's stock market after it touched a five-year low at the start of the week.
"If you look at the fundamentals in the region and how the sell-off in Chinese equities did not translate into a bigger sell-off in currencies, it shows how markets are slowly coming to compartmentalise some of these Chinese equity risk," said Christopher Wong, FX strategist at OCBC.
The Chinese yuan held steady against a broadly firmer dollar on Friday and fell marginally for the week. Sentiment towards riskier Asian assets was also dented after strong U.S. economic data and hawkish comments from Federal reserve policymakers prompted investors to reassess their rate-cut expectations for the year.
Anticipation of slower- and later-than-expected U.S. rate cuts in 2024 and a reassessment of the cooling U.S. economy made foreign investors pivot towards net selling of Asian equities in January.
"In the near term, Asia FXs will be under pressure from growing expectations of 'slower and shallower' Fed rate cuts vs what the market had been pricing in," said Poon Panichpibool, a markets strategist at Krung Thai Bank.
"Unclear signs of China's economic recovery could negatively affect Asia FX as well."
Markets are now awaiting U.S. inflation data due next week for further clues on rate cuts. Stock markets in the region also remained under pressure this week, with South Korea eking out marginal gains, while Singapore retreated 1.3%.
Shares in the Philippines climbed 2.1% for the week. The focus is now on the Bangko Sentral ng Pilipinas (BSP), which is meeting next week.
"We expect the BSP to maintain its hawkish stance, and cut only when it sees a sustained downtrend in inflation," Barclays analysts wrote.
Meanwhile, Indonesia is set to hold its 2024 presidential election next week, and Malaysia and Singapore are scheduled to release their gross domestic product (GDP) data.