In Asia, the BRICS currencies – CNY, INR, IDR, MYR, and THB – were significantly more resilient than the US-allied currencies such as JPY, KRW, and PHP. This month’s top BRICS currencies were the THB and MYR, which staged a late comeback this week on the Fed’s rate cut and the Xi-Trump agreement to extend the trade truce for another year. The CNY appreciated to the year’s strongest closing level just below 7.10 per USD, guided by stronger daily fixing rates. Conversely, the INR fell over the past week after the Fed cast doubts on a December rate cut, reversing this month’s earlier gains. However, the Reserve Bank of India stepped up verbal intervention as the INR approached the record-low level of 88.8 per USD. The IDR stabilized around October’s average level of 16600 per USD, following the sell-off triggered by the massive protests in late August. Bank Indonesia refrained from a rate cut at its October 22 meeting and kept rates unchanged to maintain macroeconomic stability amid higher-than-expected inflation and lower-than-expected trade performance.
As for the US-allied Asian currencies, the JPY was the weakest, depreciating by 4% this month to 154 per USD. Markets could not shake off Japanese Prime Minister Sanae Takachi’s fiscal stimulus plans and the Bank of Japan’s continued restraint on rate hikes. The KRW depreciated to a five-month low around 1440 per USD on October 23 before stabilizing at 1420-1440, driven by a 6.7% rebound in the Nasdaq Composite Index and US President Donald Trump’s friendly visit to Asia this week, including the APEC Summit hosted by South Korea. The PHP depreciated to a new lifetime low of 59.1 per USD on October 28. However, the PHP’s new low was only slightly above previous lows seen around 59 in 2022 and 2024. Bangko Sentral ng Pilipinas (BSP) reiterated that it intervenes to moderate long-term volatility, emphasizing that the PHP remains supported by its sound fundamentals. After the Fed’s final rate hike in July 2022, USD/PHP fluctuated between 55 and 59.
Markets should be wary about extending October’s developments into November. The US government shutdown is entering its second month and could surpass the longest one, which occurred between December 2018 and January 2019, inflicting more pain on the US economy. Pay attention to the gubernatorial elections in Virginia and New Jersey on November 4, as they will be the first indication of voter sentiment into the 2026 midterm elections. Markets expect a pro-Democrat swing could lead to a faster resolution (risk-positive, USD-negative), and a Republican hold could lead to entrenched polarisation. In Japan, Prime Minister Sanae Takaichi will present the supplementary budget during the extraordinary Diet session, which is likely to face opposition from rival factions within the Liberal Democratic Party, the new junior coalition partner (Inshin), regarding fiscal credibility and bond-financed stimulus measures without accompanying revenue increases.
Quote of the Day
”The man who moves a mountain begins by carrying away small stones.”
Confucius
October 31 in history
“Mount Rushmore was completed in 1941 after 14 years of work.”
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