Asian stocks tumbled on Tuesday after President Donald Trump’s shock dismissal of a Federal Reserve governor rattled global confidence in the U.S. central bank’s independence, with regional currencies sliding in tandem.
Equities in Manila, Kuala Lumpur, and Seoul each shed nearly 1%, while Singapore and Bangkok shares also retreated, falling more than 0.3% as investors fled riskier assets.
A gauge of emerging Asian equities fell 0.5%, snapping a three-session rally. The index notched a near four-year high in the previous session.
Currencies tracked the equity weakness, with the Philippine peso leading declines by slipping 0.3% to 56.819 per U.S. dollar and the Malaysian ringgit giving up 0.2% for its worst session in a week.
The Indian rupee, Taiwan’s dollar, and Indonesian rupiah each traded flat.
The turmoil stemmed from Trump’s unprecedented decision to fire Fed Governor Lisa Cook over alleged mortgage fraud, a move that deepened concerns about political interference in monetary policy.
The U.S. dollar index retreated 0.2% after Monday’s 0.7% surge.
The dollar’s retreat reflects concerns that reshaping the Fed could favour more dovish policy, though sustained weakening likely requires disappointing U.S. data this week, including economic growth and inflation readings, according to Christopher Wong, a currency strategist at OCBC.
Wong said Asian currencies are following equity sentiment lower while markets await key U.S. economic data releases later this week, with traders appearing to react to data outcomes rather than positioning ahead of the releases.
Later in the day, the U.S. will release the Conference Board Consumer Confidence Durables goods orders for July and the Richmond Fed manufacturing index.
The U.S. Personal Consumption Expenditures prices reading, due on Friday, is considered the Fed’s preferred inflation gauge.
Looking ahead, the Bank of Korea and Bangko Sentral ng Pilipinas are due to announce rate decisions on Thursday, with economists expecting South Korea to hold rates steady while the Philippines is poised to cut by 25 basis points, according to economists polled by Reuters.
Bank Indonesia surprised markets last week with a 25-bp rate cut and signalled more easing ahead, part of a broader regional trend, as Asian central banks pivot toward accommodation.
The Bank of Thailand followed suit with a similar quarter-point reduction earlier this month, while the Reserve Bank of India held rates steady after delivering a surprise 50-bp cut in June.
HIGHLIGHTS:
** China calls on state-owned firms to boost industrial aid to Tibet
** Wall Street ramps up bets on September rate cut after Powell’s dovish tone – Reuters
