Investing.com — Most Asian currencies were subdued on Friday, with the South Korean won posting big losses ahead of key U.S. jobs data, while the Indian rupee was slightly higher after the country’s central bank kept interest rates steady but cut bank reserve requirements .
The Reserve Bank of India remained unchanged, as expected on Friday, but lowered the required cash reserve ratio for local banks.
The central bank also lowered its economic growth projection for the current fiscal year and increased its inflation estimate.
Recent data has shown that the Indian economy was cooling after several quarters of stellar growth, while inflation rose past the central bank’s target range of 6%.
The Indian rupee pair fell 0.1% after RBI Governor Shaktikanta Das said the central bank will take more steps to attract foreign inflows and support the currency after it hit a series of record lows in November and December . The pair hit an all-time high of over Rs 84.8 earlier this week.
An excessive rate cut by the Fed earlier this year had given Asian central banks some leeway to cut rates, but the weakening of domestic currencies and inflation remaining above target in some economies have dampened expectations of rate cuts. reduced in the short term.
Market consensus for Asia has moved toward fewer rate cuts, largely driven by the Fed’s actions, resulting in lower interest rate spreads for Asia versus the US, ING analysts said in a note.
“However, we think a combination of strong disinflation and slower growth will open room for larger rate cuts than what the market is pricing in, especially for the Philippines, Singapore, India and perhaps Indonesia,” she added.
S. Korean won its worst week in eight months amid calls to impeach the president
The South Korean won rose 0.5% on Friday. The pair is expected to rise 1.8% this week, the biggest weekly gain since early April, following President Yoon Suk-Yeol’s failed attempt to impose martial law in the country.
In response, the country’s lawmakers called for President Yoon’s impeachment. Even his own ruling party leader Han Dong-hoon said on Friday that Yoon should be removed from office to protect the nation.
Instability in South Korea dampened sentiment across Asia, as the country is seen as a pillar of the East Asian economy.
The Singapore dollar pair rose slightly, while the Australian dollar pair fell 0.5% ahead of next week when the central bank is expected to keep interest rates steady.
The Chinese yuan’s onshore pair remained largely unchanged ahead of China’s annual Central Economic Work Conference (CEWC), which takes place next week. Chinese inflation and trade data are also available.
The Japanese yen pair was largely subdued, while the Thai baht pair fell 0.3%.
Dollar steady with nonfarm payrolls, Fed in focus
Trading in Asia remained stable and on track for a subdued weekly performance.
Traders stayed away from big bets on the dollar ahead of key data to be released later in the day that will likely play a role in the Fed’s rate plans. Friday’s figures through November are expected to show a sharp recovery in payroll figures, following mediocre figures for October.
While the Fed is widely expected to cut rates by 25 basis points at a meeting later in December, traders have become more uncertain about the long-term outlook for rates, especially in light of expansionary policies under incoming President Donald Trump.
The Fed recently indicated that the strength of the U.S. economy, as evidenced by a strong labor market, gave the central bank more leeway to consider future monetary easing.
