Asian Currencies Stay Steady as Dollar Nears Weekly Losses
Asian Currencies and Dollar Ahead of Nonfarm Payrolls
Most Asian currencies remained stable on Friday, while the dollar was on track for a negative week leading up to the release of key U.S. nonfarm payrolls data. The data is expected to offer more insights into the direction of U.S. interest rates.
Fed’s Position and Impact on the Dollar
The upcoming data comes after the Federal Reserve’s decision to maintain interest rates and dismiss expectations for a rate cut in March. Despite this, Fed Chair Jerome Powell expressed optimism about the U.S. economy, attracting investors towards risk-driven assets, despite the prospect of prolonged higher interest rates.
Asian Currencies and Regional Performance
Consequently, traders sold off the dollar after a brief increase. This led to the and currencies remaining unchanged in Asian trade on Friday, with both set to register a 0.4% loss for the week.
Impact on Asian Currencies
Most Asian currencies benefited from this shift, with the – a key indicator of risk appetite towards Asian markets – rising by 0.4%. Additionally, the Aussie recovered from a one-month low as the central bank is expected to keep interest rates steady.
Australian and Japanese Economies
Inflation readings in Australia showed a slight easing but remained above the RBA’s target range. Meanwhile, the yen found resilience amid growing conviction that the Bank of Japan is close to moving away from its ultra-dovish policies.
Regional Markets and Currency Performance
Elsewhere, the rose by 0.2% as data showed grew slightly less than expected in January. The performed well, recovering sharply from near record lows after the ruling BJP party unveiled a conservative annual budget, which is favorable for India’s fiscal deficit.
Chinese and Global Market Implications
On the other hand, the remained flat following a stronger-than-expected midpoint fix from the People’s Bank of China. Losses in the yuan were curbed by reported intervention in currency markets after underwhelming purchasing managers index readings for January, indicating little signs of improvement in the Chinese economic recovery.
Market Speculations and the Labor Market
Following the Fed’s stance, traders started pricing in a 25 basis point cut in May, with analysts expecting at least four more rate cuts after that. The upcoming nonfarm payrolls data is anticipated to provide further insights into the labor market, which the Fed has cited as a significant factor in driving interest rate cuts.
