In the landscape of emerging Asian currencies and stock markets this year, the Malaysian ringgit faced a challenging time, poised to register the most significant losses among its peers. On the flip side, stock markets in Taiwan, India, and South Korea were poised for substantial annual gains, driven by an optimistic outlook on rate cuts that bolstered investors' willingness to take on more risk.

Ringgit's 2023 decline dilemma

Throughout 2023, the ringgit grappled with a trajectory of decline, heading towards a third consecutive year of losses with a depreciation exceeding 4 per cent. A major contributing factor to this decline was attributed to the sluggish growth in the Chinese economy, observed KCM Trade analyst Tim Waterer.

Among the dynamics influencing emerging Asian currencies, the fluctuating expectations surrounding US interest rate policies held sway. Bond yields, for a significant period of time, favoured the US dollar, making it challenging for EM currencies to advance. However, recent months witnessed a cooling off of bond yields, allowing EM currencies to stage gains against the greenback.

Currencies in 2023 flux

While the rupee and Chinese yuan were on course to register losses of 0.5 per cent and 2.8 per cent, respectively, for the year, the South Korean won faced a 1.8 per cent drop. In contrast, the Singapore dollar emerged as the region's top-performing currency, marking a 1.7 per cent gain, closely trailed by the Thai baht's 1.2 per cent ascent this year.

The stock markets painted a varied picture, with Taiwan leading the pack, set to close the year with an impressive 26.7 per cent surge, marking its most robust performance since 2009. Following closely, Indian stocks showed a substantial gain of 20 per cent, while equities in Seoul recorded an 18.7 per cent increase. However, Bangkok's benchmark index faced a considerable downturn, ending the year with a 15.2 per cent drop, marking its most significant decline since 2008.

(With Reuters inputs)