Asian Stocks Tumble, Yen Rises Ahead of US Jobs Data

Asian markets tumbled on Friday, January 10, 2025, as investors braced for the release of crucial US jobs data later in the day. The MSCI gauge for emerging market stocks fell 0.5%, touching its lowest since September 2024. Stocks in Singapore fell 1.9%, and the Singapore dollar slipped 0.2%. The Thai baht declined 0.3%. Meanwhile, the Japanese yen climbed against the US dollar, reaching near two-week lows.



The US nonfarm payrolls report, due later in the day, is expected to show that 160,000 jobs were added in December, with unemployment holding at 4.2%. A much stronger increase in jobs would bolster the case for fewer rate cuts by the Federal Reserve and likely strengthen the greenback, in light of recent data pointing to a resilient US economy. The prospect of fewer rate cuts and uncertainty regarding President-elect Donald Trump's proposed tariff and immigration policies have led to a surge in global bond yields, supporting the dollar and keeping emerging market currencies under pressure this week.

In Asia, the Bank of Korea (BoK) and Bank Indonesia (BI) will deliver their monetary policy decisions next week. Both central banks have already started their rate-easing cycle, but analysts believe they will likely hold rates this time. "Outsized FX moves in December will ultimately constrain the BoK from lowering its policy rate in January," Barclays analysts said in a note. The South Korean won declined 0.3%, while stocks closed 0.2% lower. The benchmark equity index rose 3% in its best week since mid-November, helped by hopes surrounding artificial intelligence technologies.

Equities in Indonesia climbed 0.6%, while the rupiah edged lower. "While BI would likely prefer to resume its rate-cutting cycle, we believe pressures on the IDR (rupiah) override the central bank's pro-growth instincts," Barclays analysts said. Markets are awaiting inflation data from India and retail sales and GDP data from China next week.

HIGHLIGHTS:
China's central bank halts bond buying, possibly with eye on yuan
Japan November household spending falls as price pressures persist
Malaysian palm oil stocks hit 19-month low in December as output drops - Reuters

In conclusion, Asian markets have shown resilience due to attractive real rates, domestic support, and lack of fiscal concerns. However, investors remain cautious on EMFX in the medium-term, given the potential impact of US policy on capital flows and the declining real yield cushion. The USD rally and reduced EM carry make EMFX vulnerable in the near term. As the US jobs report approaches, investors are closely watching the developments, with the potential for a stronger-than-expected jobs report to bolster the case for fewer rate cuts and strengthen the greenback.