South Korea, Indonesia Drag Asian Currencies, Stocks on Impending US Tariffs

RUPIAH - JAKARTA. South Korea and Indonesia led declines among emerging Asian currencies and stocks on Friday as the U.S. dollar strengthened, while markets braced for President Donald Trump's tariffs on China, Mexico and Canada, set to take effect next week.

The Korean won lost as much as 0.8% to a three-week low of 1,461.8 against the U.S. dollar, while equities in Seoul dropped as much as 3.3%, set for their worst day since August 2024.

The MSCI gauge of emerging market currencies lost 0.3%, while a gauge of emerging Asian equities dropped 2.2%.

Overnight, Trump said his proposed 25% tariffs on Mexican and Canadian goods will take effect on March 4 along with an extra 10% duty on Chinese imports, slashing market participants' hopes for a further delay in their implementation.

That sent the dollar index hovering near a one-week top against a basket of currencies. It was, however, on track for a monthly loss of 1%.

"Markets are now thinking what is next. After tariffs on China, Mexico and Canada, tariffs on products such as cars and semiconductors may materialise," said Jeff Ng, head of Asia macro strategy at Sumitomo Mitsui Banking Corporation.

Such tariffs will negatively impact the currencies of trade-open economies such as South Korea, Indonesia, Malaysia and Thailand more, he said.

The Indonesian rupiah dropped 0.8% to its lowest level since March 23, 2020, and was on track for its fifth consecutive monthly loss.

Shares in Jakarta fell 3% and were down 11% for the month, their worst monthly performance since March 2020.

Bank Indonesia (BI) had paused its monetary easing cycle earlier this month, but said further easing to prop up economic growth is only a matter of timing.

"BI has shifted towards a pro-growth policy but will defend the rupiah against excessive volatility amid temporary weakness," Ng said, adding that focus is on any policy implications from Prabowo Subianto's administration.

SMBC expects USD/IDR to slip below the 16,000 threshold by 2025-end. The Thai baht dropped 0.3% and was set for its biggest monthly drop since November, following a surprise rate cut from the central bank.

The Philippine peso traded flat but was up 0.8% for the month.

The central bank had unexpectedly held steady on interest rates earlier this month. Among other regional equity markets, Thai stocks fell 1.6% and set to post their biggest monthly drop since March 2020 after clocking four straight months of losses.

Malaysian shares lost 0.4%, with investor focus now on the central bank's monetary policy decision due next week.

Chinese stocks fell 1.22%, while investors expect an additional stimulus from next week's National People's Congress, in the wake of Trump's trade policies.

The country, Southeast Asia's biggest trading partner, is expected to report a contraction in its factory activity for a second month in February, a Reuters Poll showed.

HIGHLIGHTS:

India's economic growth expected to have picked-up in the October to December quarter
Thai factory output falls 0.85 y/y in January, better than forecast