The Latest on Asian Currencies and the Dollar
Asian Currencies Trading in a Tight Range
Most Asian currencies remained within a narrow range on Thursday, following weak signals from China’s economy. The dollar also stabilized after recent losses, with markets eagerly awaiting a crucial inflation reading later in the day.
Weak Economic Signals from China
The yuan strengthened slightly after a stronger midpoint fix from the People’s Bank of China. However, purchasing managers index data revealed a sustained decline in economic activity, as China’s major economic engines grappled with deteriorating overseas demand.
Continued Weakness in the Chinese Economy
The reading underscored ongoing weakness in the Chinese economy, as the anticipated post-COVID rebound failed to materialize.
Yuan Set for a Strong November
Despite the challenges, steady PBOC support and a less hawkish outlook for the Federal Reserve positioned the yuan for a 2.6% gain in November. The currency also remained close to a five-month high against the dollar.
Winding Down of the Asian Currency Rally
Other Asian currencies showed minimal movement on Thursday as the weeks-long rally in regional currency markets appeared to be tapering off. However, most regional units were poised for remarkable gains in November, driven by growing market confidence in the Fed’s interest rate trajectory.
Performance of Key Asian Currencies
- The yen marked a sharp recovery from near 33-year lows in November, set to rise 3% in the month.
- The Australian dollar was on track for nearly a 5% gain in November, trading close to a four-month high.
- The won was positioned for a 4.5% jump in November, despite sustained weakness in the South Korean economy.
- Indian rupee performance for the September quarter was expected to reflect sustained growth in the fastest-growing major economy.
Dollar’s Steep November Losses
The dollar moved little in Asian trade on Thursday, recovering slightly from its lowest levels since mid-August. It was set to lose 3.6% in November, its worst month in a year.
Anticipation for Key Economic Data
Focus was now on the PCE inflation data, the Fed’s preferred inflation gauge, due later in the day. Market participants were also waiting for a second reading on U.S. GDP, as well as a speech by Fed Chair Jerome Powell on Friday.
