Most Asian currencies, including the Thailand baht and Indonesian rupiah, strengthened on Friday as anticipation grew for a potential rate cut by the Federal Reserve in September. The baht rose by 0.5% for the third consecutive day, supported by reduced concerns of political instability following the appointment of newcomer Paetongtarn Shinawatra as Thailand’s youngest prime minister and better-than-expected second-quarter GDP growth.
According to Jeff Ng, Head of Asia Macro Strategy at Sumitomo Mitsui Banking, the baht is poised to benefit from post-pandemic normalization, with GDP growth and the current account bolstered by export demand and tourism recovery.
Investors are closely monitoring Fed Chair Jerome Powell’s speech at the Jackson Hole symposium for insights on the interest rate outlook and economic conditions. Recent Fed minutes and comments from officials indicate growing expectations of an imminent rate cut in the US.
In Indonesia, where political protests are ongoing, the rupiah rebounded by 0.4%, while Malaysia’s ringgit and the Taiwan dollar remained stable. The South Korean won surged by 0.4%, and Singapore’s dollar climbed by 0.2% following the release of July’s core inflation data, which showed a 2.5% increase in the key consumer price index.
With Fed rate cuts appearing more certain, Asian currencies are aligning with the narrowed yield gap, as noted by analysts from Capital Economics. Asian markets, including those in Bangkok, Jakarta, Seoul, and Beijing, saw varying levels of gains, while the Japanese yen strengthened by 0.3% after Japan’s central bank governor reiterated the determination to raise interest rates if inflation targets are met.
