Asia FX buoyed by rate cut bets; S. Korean won remains near 2-yr low

Most Asian currencies drifted higher on Thursday as traders maintained bets on a December interest rate cut by the U.S. Federal Reserve, while the South Korean won weakened further amid heightened political uncertainty in the country.

Fed Chair Jerome Powell flagged strength in the U.S. economy at a New York Times event and did not downplay expectations for a December rate cut, although he did flag a more cautious approach to future easing.

The dollar weakened slightly on the prospect of lower rates in the near-term. The US Dollar Index edged 0.1% lower, while US Dollar Index Futures also inched down.

But regional investors remained largely cautious over South Korea's political turmoil, where any escalations could significantly affect investor confidence all over Asia. S. Korean won falls despite rescue measures

The South Korean won weakened further on Thursday, with the USD/KRW pair rising 0.5%.

The won had reached a two-year low on Wednesday, although it pared losses and closed flat after South Korean President Yoon Suk-Yeol abruptly revoked an imposition of martial law amid public and political ire.

South Korea's Finance Ministry announced a 40 trillion won ($28.35 billion) market stabilization fund. The Bank of Korea may buy bonds and expand repo operations, with authorities ready to act under contingency plans if necessary.

Other data showed that South Korea's economy grew just 0.1% in the third quarter, unchanged from advance estimates issued earlier.

The won is already one of the worst performers in the region, having fallen more than 9% so far this year. Adding to that, downward pressure from a strengthening dollar, and fears of a renewed U.S.-China trade war have also eroded the outlook for the currency.

Against this backdrop some other currencies also weakened, with the Chinese yuan's onshore USD/CNY pair rising 0.2% and remaining close to four-month highs.

The Indian rupee's USD/INR ticked marginally higher to 84.723 rupees. The rupee is forecasted to weaken further, surpassing the 85 per U.S. dollar mark within the next six months, despite ongoing intervention efforts by the Reserve Bank of India to curb its depreciation, according to a Reuters poll.

The RBI is set to decide on interest rates on Friday. Malaysian ringgit, Japanese yen rise on US rate cut bets

The Malaysian ringgit's USD/MYR pair fell 0.5%, and the Philippine peso's USD/PHP pair inched 0.2% lower, while the Singaporean dollar USD/SGD pair ticked 0.1% lower.

The Japanese yen's USD/JPY pair also fell 0.2%, while USD/THB pair inched slightly lower. The Australian dollar's AUDUSD pair was 0.1% higher.

Investors drew some comfort from Powell's speech, although they remained cautious over the long term outlook for rates, especially under a Donald Trump Presidency in the U.S.. Markets are pricing in a roughly 78% chance of a quarter percentage point rate cut by the Fed in December, according to CME FedWatch .

Source: Investing.com