Asian Currencies Weaken as Dollar Surges on U.S. Inflation Data
Hotter-than-expected U.S. inflation data
Dollar at 5-Month High, June Rate Cut Bets Evaporate
The strength of the U.S. dollar has put pressure on Asian currencies, which weakened in response to the latest inflation data. Traders rushed to adjust their positions after the U.S. inflation numbers exceeded expectations, leading to a surge in the dollar to a five-month high.
With the Federal Reserve signaling a possible shift in its interest rate policy, Asian currency markets are facing near-term challenges. The prospect of higher interest rates in the U.S. has dimmed hopes for a rate cut in June, further impacting Asian currencies.
Chinese inflation figures also added to the negative sentiment, as concerns about deflation in the region’s largest economy persisted.
Yen Intervention Concerns as USDJPY Hits 34-Year High
The Japanese yen’s weakness has raised concerns about potential intervention by the Japanese government. The USDJPY pair reached its highest level in over three decades, prompting officials to warn about potential market intervention to stabilize the currency.
Finance officials, including Vice Finance Minister Masato Kanda, have expressed caution regarding the yen’s volatility and hinted at possible intervention measures to address the situation.
Chinese Inflation Trends Impact USDCNY Pair
While the Chinese yuan remained steady, the USDCNY pair continued to hover near its five-month high. However, the Chinese central bank’s efforts to control the currency’s movement have limited further gains for the dollar against the yuan.
Weakening inflation in China and ongoing deflationary trends indicate challenges for the country’s economy, affecting broader Asian currencies as well.
Despite these challenges, some currencies showed resilience in the face of market pressures. The Australian dollar and South Korean won managed to stabilize after initial losses, while the Singapore dollar and Indian rupee faced varying degrees of volatility.
