Asian FX muted; S.Korean won at 2-year low amid political jitters

Asian currencies drifted lower on Wednesday with the South Korean won at a two-year low after President Yoon Suk-Yeol's failed attempt to impose martial law, while the Australian dollar fell to a four-month low on weak gross domestic product data.

Market participants were also on edge before an address by U.S. Federal Reserve Chair Jerome Powell later in the day, which is expected to provide more clarity on interest rates. Regional currencies were pressured by a spike in the dollar this week, amid increasing uncertainty over the long-term outlook for interest rates.

The US Dollar Index edged 0.1% higher, rising for the third straight session, and the US Dollar Index Futures also ticked higher in Asia hours. S.Korean won at 2-year low amid political turmoil

The South Korean won's USD/KRW  pair rose 0.1% to 1416.15 won, after surging as high as 1,444.05 won in overnight trade- its highest level since November 2022.

South Korean President Yoon Suk-Yeol declared martial law on Tuesday in an effort to counter “anti-state forces” among his political opponents. However, the move faced immediate backlash, including parliamentary rejection and public protests, leading him to revoke the measure within hours.   The won also pared initial losses as South Korea's central bank held an emergency meeting to stabilize the domestic market.   South Korea’s finance ministry announced on Wednesday that it is prepared to inject "unlimited" liquidity into financial markets, after Finance Minister Choi Sang-mok held talks with Bank of Korea Governor Rhee Chang-yong in a central bank board meeting overnight.   South Korean legislators have demanded Yoon's impeachment, plunging the nation into its most significant political crisis in decades, and dampening investor confidence across Asia.   The Japanese yen's USD/JPY pair rose 0.3% and the Singapore dollar's USD/SGD pair inched 0.1% higher, while the Chinese yuan's onshore USD/CNY pair was largely muted.   The Indonesian rupiah's USD/IDR pair edged slightly higher, while the Indian rupee's USD/INR pair was largely unchanged near record highs.   The Philippine peso's USD/PHP pair, and the Malaysia's USD/MYR pair, ticked slightly lower. Aussie slumps to 4-mth low as GDP miss spurs rate cut bets   The Australian dollar weakened sharply on Wednesday, with the AUD/USD pair falling more than 1% to its lowest level since early August.    GDP data showed the country’s economy grew less than expected in the third quarter, sparking increased bets that the Reserve Bank will cut interest rates earlier in 2025. Quarter-on-quarter GDP growth also fell below the RBA's 0.5% forecast.   The weaker GDP was attributable to soft household spending, while easing export prices also weighed amid slowing global demand for commodities. The reading sparked bets that sustaine d weakness in the Australian economy will push the RBA into starting an easing cycle earlier in 2025.   ANZ and Westpac currently expect the RBA to begin cutting rates from May 2025, in what is expected to be a mild easing cycle.        

Source: Investing.com