Asian currencies and stocks lost more ground on Friday and were poised to close the week lower, as a hawkish U.S. rate outlook kept investor sentiment subdued.

The Malaysian ringgit and Thailand's baht weakened the most among Asian currencies, shedding 0.2% each. The ringgit was on course for a tenth straight session of declines. However, it remains the only currency among its Asian peers which is set to end the year stronger.

The Indonesian rupiah traded largely flat, but was set to end the week near a four-month low. It has weakened nearly 8% since its September peak. The baht was on track for its first weekly loss in five.

After the Federal Reserve cut interest rates as expected on Wednesday, central banks in Indonesia, Thailand, and Taiwan maintained status quo to address currency and global economic uncertainty concerns, while the Bangko Sentral ng Pilipinas cut rates.

The MSCI's emerging markets currency index has plummeted 0.6% this week, threatening to hit a fresh four-month low if it breaks below Thursday's low.

Meanwhile, Fed Chair Jerome Powell's comments linking future rate cuts to inflation progress prompted investors to scale back policy easing expectations, implying only 37 basis points of cuts in 2025 and sending the dollar to a two-year high against major currencies.

Central bankers across Asia, from South Korea to India to Indonesia, swiftly responded on Thursday, intervening in markets by selling dollars to defend their currencies. Emerging-market assets are likely to remain under pressure as long as the U.S. dollar and Treasury yields stay elevated and the threat of tariffs from the Trump administration persists.

"As a result of the incoming trade tariffs next year contributing to stronger re-inflation bias, we expect the U.S dollar to strengthen further against most major FX peers in 1H25," said Heng Koon How, head of markets strategy at UOB in Singapore.

"Asian FX are expected to perform even weaker, to fall alongside the Chinese yuan for the first three quarters of 2025 before stabilising in 4Q25."

In a rare bright spot, the Philippine peso and Manila stocks rose 0.4% and 1.2%, respectively, after BSP Governor Eli Remolona said the central bank was open to cutting rates at its first policy meeting in 2025.

HIGHLIGHTS:

** China leaves benchmark lending rates unchanged

** South Korea to loosen foreign exchange regulations ** Malaysia's November consumer price index rises less than forecast - Reuters