Asian stocks fall on US tariff uncertainty; currencies set for monthly gains
SINGAPORE/HONG KONG: Emerging Asian stock markets fell on Friday after a federal court temporarily reinstated tariffs imposed by US President Donald Trump, while currencies showed a varied performance against a muted dollar but remained on track for monthly gains.
MSCI's gauge of Asian emerging market equities fell 0.6 per cent. Stocks in Thailand dropped as much as 1.1 per cent to a more than one-month low and those in the Philippines fell 0.7 per cent. Seoul shares traded nearly 1 per cent lower.
A federal appeals court temporarily reinstated the most sweeping of Trump's tariffs, a day after a US trade court ruled that he had exceeded his authority in imposing the duties and ordered an immediate block on them.
The world is still faced with the tariff reality and markets are taking a more conservative bet that much of Trump's tariffs would stay, according to Fiona Lim, senior FX strategist at Maybank.
As a result, the US dollar surrendered earlier gains and remained subdued on Friday, poised for its fifth consecutive monthly decline. Regional currencies moved in different directions.
The Thai baht and the South Korean won were down 0.3 per cent and 0.4 per cent, respectively. The Malaysian ringgit and the Philippine peso each edged 0.1 per cent higher.
Trump's tariff reversals and rising concerns over US fiscal health have undermined confidence in American assets, prompting investors to shy away from the dollar and favour Asian currencies this month.
The MSCI's emerging market currencies index has gained more than 2 per cent in May, its best monthly performance since November 2023. The baht has gained 2.3 per cent in May, its best monthly gain since September 2024, and the Singapore dollar is poised for a fifth consecutive monthly gain.
The won has also jumped nearly 4 per cent this month, with Seoul officials confirming currency policy was on the table during recent talks with US counterparts, fuelling speculation of joint FX moves.
While the Taiwan dollar, which was not trading on Friday on account of a public holiday, has logged a 6.5 per cent monthly gain - its best on record.
The bumper performance follows a historic surge in the currency in early May on speculation that Washington has asked Taipei to allow it to strengthen as part of tariff talks.
Taiwan's central bank has denied that Washington made any such request. All eyes are now on developments regarding the highly anticipated trade deals as the July 9 tariff deadline imposed by Trump approaches.
"Any trade deal or signs of tensions easing could continue to spur unwinding of short USD positions and keep the USDAxJ mostly supported on dips in the near term," Maybank's Lim said. Markets in Indonesia were closed for a public holiday.
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