Emerging Asian currencies firmed on Monday, aided by pressure on the dollar amid U.S. fiscal concerns, while risk appetite improved after U.S. President Donald Trump postponed his threat to impose 50% tariffs on EU goods by more than a month.
The MSCI index of emerging market currencies rose as much as 0.4% to its all-time high.
The Malaysian ringgit and the Taiwanese dollar jumped 0.6% and 0.5%, respectively, to their highest levels in three weeks, and the Singapore dollar reached an eight-month high.
The three currency units have gained between 1.9% and 6.6% this month.
“The dollar selling seems to be fairly broad-based. Fiscal concerns have clearly been something that have weighed on the dollar and led to some reassessment, which in turn has fuelled the rally in Asian currencies,” said Mitul Kotecha, head of Asia FX and emerging markets macro strategy at Barclays.
Moody’s downgrade of the U.S. credit rating earlier this month and the passing of a sweeping tax and spending bill by the Republican-controlled House of Representatives last week have raised concerns about the fiscal health of the world’s largest economy.
Moreover, Trump backed away on Sunday from his threat to slap 50% tariffs on imports from the European Union next month, agreeing to extend the deadline until July 9.
Even as the rapid de-escalation calmed worries about a global downturn, it served as a reminder of how quickly and suddenly U.S. trade policy can turn.
China’s yuan strengthened to trade near a seven-month high against the dollar.
The Indonesian rupiah rose as much as 0.3% to a five-month high, while the South Korean won climbed as much as 0.4% to its highest level since October 2024. The won has risen more than 4% this month against the backdrop of broader dollar selloff.
Meanwhile, officials also said that currency policy was discussed at a meeting they had in Milan with U.S. officials earlier this month.
Investor focus is now on the Bank of Korea’s policy meeting on Thursday, with analysts saying the stronger won may give the central bank more confidence to cut rates.
Among stock markets, Seoul shares jumped 1.3%, while equities in Jakarta, Singapore and Kuala Lumpur slipped between 0.2% and 1%.
HIGHLIGHTS:
** Thai April exports rise 10.2% y/y, above forecast
** Malaysia PM has written to President Trump to organise U.S.-ASEAN meeting
** Indonesia to launch economic stimulus to boost consumption
** Indonesia central bank to give nearly $5 billion flexibility to banks to manage liquidity – Reuters
