Investing.com — Most Asian currencies edged higher Thursday as traders continued to bet on a rate cut by the U.S. Federal Reserve in December, while the South Korean won continued to weaken amid increased political uncertainty in the country.
Fed Chairman Jerome Powell signaled the strength of the US economy during a meeting in the New York Times and did not downplay expectations for a rate cut in December, although he did signal a more cautious approach to future easing.
The dollar weakened slightly on the prospect of lower interest rates in the short term. The price fell 0.1% lower, but also slowly went down.
But regional investors remained largely cautious about the political turmoil in South Korea, where any escalations could significantly dent investor confidence across Asia.
S. Korean won falls despite rescue measures
The South Korean won weakened further on Thursday, with the pair rising 0.5%.
Profits hit a two-year low on Wednesday, although losses were pared to close flat after South Korean President Yoon Suk-Yeol abruptly revoked an imposition of martial law amid public and political anger.
South Korea’s Finance Ministry has announced a 40 trillion won ($28.35 billion) market stabilization fund. The Bank of Korea could buy bonds and expand repo operations, with authorities prepared to act if necessary under contingency plans.
Other data showed South Korea’s decline was just 0.1% in the third quarter, unchanged from previously issued estimates.
The won is already one of the worst performers in the region, having fallen more than 9% so far this year. Moreover, downward pressure from a strengthening dollar and fears of a renewed trade war between the US and China have also eroded the currency’s prospects.
Against this backdrop, some other currencies also weakened, with the onshore Chinese yuan pair rising 0.2% and remaining close to a four-month high.
The Indian rupee traded marginally higher at 84,723 rupees. The rupee is expected to weaken further and cross the US$85 mark in the next six months, despite continued intervention efforts by the Reserve Bank of India to curb depreciation, according to a Reuters poll.
The RBI will make a decision on Friday.
Malaysian ringgit and Japanese yen rise on bets on US interest rate cut
The Malaysian ringgit pair fell 0.5% and the Philippine peso fell 0.2%, while the Singapore dollar pair traded 0.1% lower.
The Japanese yen pair also fell 0.2%, with the pair trading slightly lower. The Australian dollar pair was 0.1% higher.
Investors took some comfort from Powell’s speech, although they remained cautious about the long-term prospects for interest rates, especially under the US presidency of Donald Trump. Markets are pricing in a roughly 78% chance of a quarter of a percentage point rate cut by the Fed in December.
