Asian currencies rise vs dollar as investors brace for Powell, U.S. jobs report

Emerging Asian currencies rose on Wednesday against the U.S. dollar, which dipped as investors turned cautious ahead of comments from the U.S. Federal Reserve Chair Jerome Powell later this session and the crucial U.S. monthly jobs report on Friday.

The Malaysian ringgit, South Korean won and Thai baht all traded higher, as investors also braced for a rate decision from the Bank of Thailand.

The gains in riskier emerging market assets came even as Chinese data showed factory activity in the world's second-largest economy contracted at a faster pace in November.

The U.S. dollar index DXY, which measures the greenback against a basket of major currencies, eased 0.13% to 106.72.

"There's room for the dollar to ease a little bit, but I think fundamentally there's still a bit of uncertainty going into 2023," said Galvin Chia, emerging markets strategist for Natwest Markets.

Emerging markets have been sensitive to the U.S. rates outlook, as the Federal Reserve's aggressive monetary tightening this year has buoyed the dollar, putting pressure on local currencies.

Many central banks in emerging Asia have sought to keep in step with U.S. rate hikes to limit the risk of capital outflows.

Against this backdrop, Chia expected the Federal Open Market Committee meeting and the U.S. November CPI print scheduled for mid-December to be closely watched.

In Asia, the Malaysian ringgit USDMYR led gains, appreciating 0.8% and was on track for its best month since March 2016. It has risen by more than 2% since Malaysia's Anwar Ibrahim was sworn in as prime minister last week, but is still down than 6.5% so far this year.

South Korea's won USDKRW rose 0.7% and was on track for its biggest monthly gain since March 2016.

Thailand's baht USDTHB rose 0.3% and stocks SET gained 0.1% ahead of the Bank of Thailand's rate decision. Analysts in a Reuters poll are widely expecting a modest 25-basis-point rise.

Chia said recent gains in the baht reflects optimism about Thailand's economic recovery which has lagged some of its peers.

"The Thai baht has been one way to express (the) reopening dynamics and economic catch-up in the Southeast Asian region, particularly when it comes to things like tourism."

Thailand's economy may not reach a forecast growth of 3.8% next year due to a global economic slowdown, but this year's growth outlook of 3.4% should still be achieved, said the country's finance minister on Tuesday.

The Indonesian rupiah USDIDR firmed 0.1%, ending a three-day losing streak, while stocks COMPOSITE added 0.1%. The currency has lost 0.95% so far this month.

Indonesia's central bank governor Perry Warjiyo said on Wednesday that energy subsidies next year will allow Bank Indonesia (BI) to raise interest rates in a measured way.

Across the region, stocks were mixed: India NIFTY surged 0.1%, with Taiwan TAIEX and South Korea KOSPI advancing 0.8% and 0.9%, respectively, whereas Singapore STI lost 0.2%.

HIGHLIGHTS:

** Indonesian 10-year benchmark yields almost flat at 6.983%

** Thai factory output unexpectedly falls 3.71% y/y in Oct

** Philippines central bank sees November inflation at 7.4-8.2%

** Markets in the Philippines are closed for a public holiday