Asian FX markets are diverging as lower oil prices and US yields support the Thai Baht, while tech-linked currencies like the South Korean Won face headwinds from ongoing AI sector volatility.
Hopes that the Democratic midterm sweep could hasten a de-escalation of the US-Iran conflict and an earlier reopening of the Strait of Hormuz drove a sharp decline in oil prices this week. Sustained lower prices would ease imported inflation for Asian oil importers, but Brent has already rebounded somewhat from its lows.
Hopes that the US midterm election outcome could hasten a de-escalation of the US-Iran conflict and an earlier reopening of the Strait of Hormuz drove a sharp decline in oil prices, though Brent has rebounded somewhat from its lows.
US Treasury yields fell after the midterms on expectations that a divided US government could constrain fiscal expansion. Since bullish here means the yield rises, the direction is bearish. Tonight's US payrolls may provide further cues on Fed expectations and yields.
US Treasury yields fell as investors expected a divided US government to constrain fiscal expansion; markets now await tonight's payrolls data for further direction.
The sharp decline in oil prices this week, linked to hopes the midterm outcome hastens a US-Iran de-escalation and a reopening of the Strait of Hormuz, eases imported inflation and external pressures for oil-sensitive Thailand. Softer US yields and a weaker USD add support, though Brent has rebounded somewhat from its lows.
Thailand is oil-sensitive: sustained lower oil prices ease imported inflation and external pressures, giving the baht scope to recover, alongside softer US yields and a weaker dollar.
The ongoing AI/tech equity selloff, driven by concerns over tighter scrutiny of AI/data-centre investments, weighs directly on tech-linked Korea, particularly if foreign equity outflows persist. Lower oil and US yields are only a partial offset since Korea's exposure runs through tech shares.
Korea is tech-linked, and the ongoing AI/tech share selloff plus foreign equity outflows are weighing on the won, outweighing the relief from lower oil prices and softer US yields.
A divided US government post-midterms is expected to constrain fiscal expansion, which has already pushed Treasury yields down and left the USD weaker, giving Asian FX breathing room. The move is expectations-driven, and tonight's US payrolls could reverse the USD direction if they shift Fed expectations.
The Democratic sweep raises expectations that a divided US government will constrain fiscal expansion, which has lowered US Treasury yields and weakened the dollar, easing pressure on Asian currencies.
Asian currencies are showing mixed performance following the US midterm elections. While lower oil prices and softer US Treasury yields provide relief for oil-sensitive currencies like the Thai Baht, the ongoing selloff in AI and tech stocks continues to pressure the South Korean Won. Investors are now closely monitoring tonight's US payrolls data to gauge future Federal Reserve policy and currency direction.
The Thai Baht is benefiting from lower oil prices which ease imported inflation, whereas the South Korean Won is suffering from a specific selloff in the AI and technology sectors.
The election outcome has fueled expectations of a divided government, which has lowered US Treasury yields and weakened the dollar, providing indirect support to several Asian currencies.