In the last trading days of the year, some of Asia’s strongest currency trends are beginning to reverse, with the Thai baht and the South Korean won leading the way.
Asian Currency Momentum Begins to Shift
In the previous three trading days, the beleaguered won, which was getting close to a level last crossed during the global financial crisis, has recovered as officials expressed their support for the currency. Conversely, the baht, the second-best-performing Asian currency this year, is losing momentum due to concerns that the central bank would retaliate against the increase, endangering the country’s exports.
As exporters traded dollars in anticipation of government backing for the domestic currency, the won outperformed its rivals on Monday. With speculators on the lookout for potential government assistance, the baht had its worst decline in seven months, behind all of its regional competitors.
Trade Disruptions and Central Bank Pressures
The actions highlight a turbulent year that has seen the region’s currencies at the forefront of trade disruptions brought on by tariffs and central bank shocks. While China’s yuan is on track for its greatest year in five years despite the nation’s pledge to keep the currency from overshooting, other currencies, such as India’s rupee, have reached consecutive lows as a US trade agreement remains elusive, prompting the central bank to intervene.
As the currency approached the psychologically significant 1,500 per dollar threshold due to foreign withdrawals and concerns that further US investment—a component of tariff negotiations—could cause additional pressure, Korean officials this week announced measures to support the currency.
South Korea’s Intervention and Market Reaction
According to Mitul Kotecha, director of Asian FX and EM macro strategy at Barclays Bank Plc, South Korea’s efforts—which include verbal involvement and the anticipation of actions like smart hedges by the national pension service—have significantly lessened the pressure on the won.
Some experts linked the baht’s 1.2% drop on Monday to concerns that the Bank of Thailand would take action to stifle recent advances in light of the actions in Korea, particularly in light of the won’s sharp correction.
Outlook for the Baht and Regional Currencies
Even though Monday’s selloff caught them off guard given low year-end trading volumes, experts warned that the baht’s weakness may continue into new year.
Currency fluctuations in the area have also been influenced by movements in precious metals, which have risen to all-time highs. The BOT‘s announcement of a regulation requiring financial institutions to report foreign currency transactions of $200,000 or more may have also contributed to the weakening of the baht.
Central Bank Measures and Future Risks
Governor Vitai Ratanakorn said on Friday that the restriction is a component of the central bank‘s attempt to control the baht’s strengthening and its association with gold transactions.
“We do anticipate a larger dollar comeback and depreciation in currencies like yuan and yen moving into next year, which might add to baht depreciation pressures particularly as sluggish economic momentum is anticipated to linger into next year,” Kotecha said. “It is hard to excuse today’s severe selloff.”
CME lean hogs‘ year-end positioning and supply levels are declining.
Thin Holiday Trading Impacts Livestock Futures
According to experts, the Chicago Mercantile Exchange had a sparse trading during the Christmas and New Year holidays, with live cattle and lean hog futures down while feeder cattle futures increased on year-end positioning.
Doug Houghton, an analyst at Brock Associates, said that many funds still have net long holdings. “If they are taking gains, that is going to weigh on things,” he added.
USDA Data Pressures Lean Hog Futures
According to Houghton, the U.S. Department of Agriculture’s quarterly report on hogs and pigs last week revealed higher than anticipated numbers in lean hogs, which also had an impact on futures.
Pork bellies dropped $4.50 to $124.08 per hundredweight, according to USDA data released on Monday afternoon.
Futures Market Performance
February lean hog futures on the CME benchmark dropped 0.050 cents to 84.475 cents per pound.
At 228.975 cents a pound, the CME February live cattle finished 0.675 cents lower. March feeder cattle closed at 341.675 cents a pound, a 1.250 cent increase.
Import Uncertainty and Market Risks
According to Houghton, “there is still a lot of uncertainty in the market about when the USDA would re-open cattle imports from Mexico, but it is impossible to determine from day to day if it is actually a concern.”
Due to the New World screwworm parasite‘s proliferation in Mexico, the United States has banned such imports; reopening the border would expand the animal supply, which would be detrimental to future generations.
Beef Prices and Packer Margins
According to USDA statistics as of Monday afternoon, select cuts of packaged beef dropped $1.88 to $349.33 per cwt. Certain cuts increased $1.82 to $345.62 per cwt.
According to livestock marketing consultancy business HedgersEdge.com, beef packers lost $235.00 per head of cattle on Monday, up from $204.95 on Friday and $161.90 a week earlier.
“Packer margins are drastically negative and that is obviously a negative market issue,” Houghton said.
Disclaimer: This article is for informational purposes only. Stock market data may change rapidly. Readers are advised to verify information from official sources and charts before making any investment decisions.
