Currencies, stocks under pressure as investors eye US trade moves

New Straits Times

3 days ago

SINGAPORE: Currencies in emerging Asia dipped against a firm US dollar on Monday, heading into a crucial week on a cautious note as investors parsed sparse details on US tariff deadlines and trade negotiations to gauge potential impact on regional assets.
The Thai baht declined 0.5 per cent to its weakest point in four sessions, while South Korea's won slipped to a nearly two-week low. The Malaysian ringgit and Indonesian rupiah slipped 0.3 per cent each.
An MSCI index tracking global emerging market currencies fell 0.3 per cent, marking its worst intraday performance in a week. Investors are closely monitoring tariff levels, implementation timelines, and the status of negotiations between the US and major trading partners.
With few concrete trade deals finalised and limited details available, markets remain on edge ahead of the July 9 deadline.
Asian economies, heavily dependent on imports from China and US investments and businesses, are caught between escalating protectionism and their economic interests, compelling them to navigate a fine line between the world's top two economies.
"Asian economies face an increasingly complex balancing act between maintaining US market access and Chinese investment flows, complicated by heavy dependence on Chinese intermediate goods and insufficient local supply chain alternatives," analysts at Nomura wrote.
"The United States' goal of plugging transshipment and reducing China's import content is an economic and geopolitical challenge for many Asian economies."
US President Donald Trump's threat of an extra 10 per cent tariff on countries aligning with the "anti-American policies" of the BRICS group pressured currencies in the region, adding uncertainty in the coming days to secure a deal.
BRICS is a group of emerging economies comprising Brazil, Russia, India and China, with Egypt, Ethiopia, Indonesia, Iran, Saudi Arabia and the United Arab Emirates included as members last year.
The US dollar index nudged higher to 97.088 in early Asia trade, though it remained anchored around multi-year lows against the euro and the Swiss franc.
"Trump's announcement to threaten an additional 10 per cent tariffs on BRICS countries looks to have weighed on the wider FX sentiment this morning as it just added to the uncertainty on the developments in the coming days," Maybank analysts wrote. Stocks in the region were also under pressure.
An MSCI gauge of equities in emerging Asia fell up to 0.8 per cent to its lowest in nearly two weeks, while a subset tracking ASEAN equities slipped to a one-week low. Equities in Thailand and Malaysia declined nearly 1 per cent each, while those in Indonesia and South Korea were largely unchanged.
Vietnam's benchmark index touched a 38-month high, while the dong edged higher. Data released over the weekend showed the Southeast Asian nation grew at a faster pace in the preceding quarter, with lower-than-anticipated US tariffs brightening the outlook for the manufacturing-reliant economy.
Taiwan's benchmark index slipped as much as 1.1 per cent to its weakest point in a week, while its dollar edged lower. China's Shanghai Composite index slipped from a nine-month high. Singapore's FTSE Straits Times scaled an all-time high on the day, underpinned by heavyweight banks, which rose about 1 per cent.