Most Asian currencies were on course to end the second year of the Covid-19 pandemic on a negative note, with the Thai baht eyeing its worst year in two decades as the tourism-reliant economy remained under pressure from travel curbs.
The baht was the region’s worst-performing currency this year, losing 11.4%.
The Taiwan dollar and China’s yuan, the only two currencies in positive territory, were chasing an over 2% annual gain. The yuan, set for a second year of gains, was poised to become Asia’s best performer.
Trading at 6.3734 per dollar on Friday, the yuan was eyeing a 2.4% appreciation over the year on the back of strong trade surpluses and robust portfolio inflows despite overall strength in the US dollar.
Analysts at Australia and New Zealand Banking Group (ANZ) forecast the yuan would remain resilient against the dollar next year despite the US Federal Reserve’s hiking cycle. They expect the currency to firm further to 6.30 per dollar by the end of 2022.
Elsewhere in Asia, the South Korean won, closed on Friday, lost 9.4% this year in its worst performance since 2008.
The Philippine peso, the Malaysian ringgit, and the Indian rupee were all set to weaken between 1% and 6%.
In India, the rupee was set for an annual drop of 1.7%, its fourth consecutive year in the red, while equities were eyeing an about 25% jump in their best year since 2017, driven by an economic recovery from the pandemic-fuelled slump and massive liquidity.
Among other regional equities, Taiwan was set to add about 24% for the year, while Indonesia and Singapore advanced about 10%. The Malaysian bourse, the only outlier, was on track to lose about 6% in 2021.
On Friday, emerging Asian currencies were largely muted, with only the Indian rupee appreciating about 0.2%, while equities were largely lower as thin-volume trading spurred volatility, with worries regarding the Omicron coronavirus variant remaining firmly in place.
“A sharp surge in Omicron cases across both the US and Europe warn of a potential collision path with a hawkish Federal Reserve (in 2022),” analysts at Mizuho Bank said in a note.