Continued tight US monetary policy weighed marginally on developing Asias currencies, while regional financial conditions remained resilient, the Asian Development Bank noted in its July update. The US dollar was bolstered by a still-high US federal funds rate, investor repositioning with the delayed start to US monetary easing, and heightened geopolitical risks that fueled risk aversion. Most currencies in developing Asia weakened slightly against the US dollar, resulting in a GDP weighted average depreciation of 2.6% in the first half of 2024. Meanwhile, risk premia across the region narrowed during the period.
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