Investing.com– Most Asian currencies fell on Friday, with South Korea taking the main losses ahead of key US jobs data, while the Indian rupee rose slightly after the country’s central bank kept interest rates steady but cut bank reserve requirements.
As expected, the Reserve Bank of India remained unchanged on Friday but lowered the cash reserve ratio requirement for local banks.
The central bank also lowered its economic growth projection for the current fiscal year and raised its inflation estimate.
The latest data showed that the Indian economy was cooling after several quarters of rapid growth, with inflation exceeding the central bank’s target range of 6%.
The Indian rupee pair fell 0.1% after RBI Governor Shaktikanta Das said the central bank would take further steps to attract foreign capital inflows and support the currency after it hit a series of record lows in November and December. Earlier this week, the pair hit an all-time high of over Rs 84.8.
The Fed’s excessive cut earlier this year gave Asian central banks some leeway to cut interest rates, but weakening domestic currencies and inflation remaining above the target range in some economies have postponed expectations for rate cuts in the near future.
The market consensus for Asia is towards fewer rate cuts, largely driven by Fed actions, resulting in lower interest rate differentials in Asia compared to the US, ING analysts said in a note.
“However, we believe that the combination of strong disinflation and slower growth will open room for larger interest rate cuts than the market is pricing in, particularly for the Philippines, Singapore, India and possibly Indonesia,” they added.
S. The Korean won his worst week in 8 months after calls for the president’s impeachment
The South Korean won rose 0.5% on Friday. The pair was set to rise 1.8% this week, the biggest weekly gain since early April after President Yoon Suk-Yeol’s failed attempt to impose martial law.
In response, national lawmakers called for President Yoon’s impeachment. Even the leader of his own ruling party, Han Dong-hoon, said on Friday that Yoon must be removed from office to protect the nation.
Instability in South Korea has dampened sentiment across Asia, given that 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 the coming week when the central bank is expected to keep interest rates on hold.
The onshore Chinese yuan pair remained largely unchanged ahead of next week’s annual China Central Economic Work Conference (CEWC). Chinese inflation and trade data are also available.
The Japanese yen pair was largely subdued, while the Thai baht pair was down 0.3%.
Stable dollar, non-farm payrolls data in Fed’s focus
Asian trading stabilized and headed for tender weekly performance.
Traders stayed away from huge dollar bets ahead of key data due later in the day that will likely include the Fed’s interest rate plans. Friday’s reading is expected to show a keen rebound in wages in November, following the average reading for October.
While the Fed is widely expected to cut interest rates by 25 basis points at its December meeting, investors have become more uncertain about the longer-term prospects for interest rates, especially in the face of expansionary policies under fresh President Donald Trump.
The Fed recently signaled that the robust U.S. economy, reflected in a robust labor market, gave the central bank greater room to consider future monetary easing.
