Asian Currencies Remain Muted Amid Rate Cut Uncertainty
Little Movement in Asian Currencies
Most Asian currencies experienced minimal movement on Friday, with a muted weekly performance as the markets remained convinced that the Federal Reserve will not cut interest rates early this year.
Regional Currencies Show Little Relief
Regional currencies did not find much relief from the overnight losses in the dollar, despite its fall from a three-month high after data showed an unexpected contraction in retail sales in January.
Greenback Curbs Losses
The dollar curbed a majority of its losses after the Federal Reserve cautioned that it may take longer for the central bank to begin cutting interest rates. It was still unclear whether inflation would move back within its 2% annual target.
Asian Currencies’ Performance
The Chinese yuan and the Indian rupee both rose 0.1% in Asian trade, and were up about 0.3% this week, marking their fifth consecutive week of gains. Bostic’s comments also came just a few days after U.S. data showed inflation unexpectedly picked up in January.
Anticipation of U.S. Interest Rates
U.S. CPI data and an address by Federal Reserve officials, which are due later in the day, are expected to offer more cues on the path of U.S. interest rates.
Impact on Asian Currencies
Traders began largely pricing out expectations that the Fed will cut rates by as soon as May or June, weighing on most Asian currencies and setting them on course for muted weekly moves.
Yen’s Performance
The Japanese yen was the worst performer among its peers this week, down 0.6% and trading near a three-month low.
Market Speculation on Bank of Japan
The yen was battered by increasing bets that the Bank of Japan will delay its planned interest rate hikes this year, especially as data on Thursday showed Japan unexpectedly contracted in the fourth quarter.
Impact on Other Currencies
The Australian dollar fell 0.2%, while the South Korean won fell 0.1%, taking little support from data that showed the country’s key exports rebounded more than expected in January. Meanwhile, the Singapore dollar fell 0.4%, while the Thai baht hovered around the 83 level.
Market Trends
Waning bets on early interest rate cuts by the Fed had battered Asian markets at the beginning of the year, with regional currencies seeing little relief in the face of higher-for-longer U.S. rates.
