Asian FX Muted, Dollar Steady Ahead of Key Events
The Asian Currency Market
Most Asian currencies remained within narrow ranges on Tuesday, while the dollar stabilized after recent advances. Traders were cautious ahead of crucial U.S. inflation data and an upcoming Federal Reserve meeting.
The Dollar and Asian Currencies
The dollar held firm above 104 against a basket of currencies as uncertainty regarding the Fed’s plans to cut interest rates in 2024 prompted some inflows into the greenback. The Japanese yen and Australian dollar dipped slightly in Asian trade.
Inflation Data and Fed Uncertainty
U.S. inflation data, expected to show a slight easing in November, was due later in the day. Traders remained wary of a higher reading, especially after strong data released last week. The Fed’s timeline for rate cuts in 2024 became more uncertain following robust payrolls data.
Asian Central Banks and Currencies
The Japanese yen rose 0.4% on Tuesday but had lost ground in the prior session due to reports that the Bank of Japan had no immediate plans to deviate from its ultra-loose policies. The People’s Bank of China’s strong midpoint fixes helped the yuan withstand negative data, leading to a widening gap between onshore and offshore rates.
Impact on Broader Asian Markets
Weaker inflation data raised concerns about a sustained economic slowdown in China, affecting sentiment in broader Asian markets. The Indian rupee hovered around record lows before the release of crucial data on the country’s economic performance.
Market Sentiment and Cautious Approach
Reserve Bank of Australia Governor Michele Bullock indicated a cautious approach to monetary policy after warning about potential inflation risks. The Indonesian rupiah, Malaysian ringgit, and Singapore dollar also remained stable.
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