Asian Currencies Hold Steady as Dollar Consolidates
Asian Currencies Show Minimal Movement Amid Dollar Consolidation
Most Asian currencies saw little movement on Thursday as the dollar’s mild consolidation provided some relief. The Japanese yen also firmed amidst expectations of government intervention, despite data indicating an economic recession.
Regional Currencies React to U.S. Inflation Reading
Regional currencies continued to reel from a hotter-than-expected U.S. inflation reading. This led traders to scale back expectations of early interest rate cuts by the Federal Reserve.
Fed Officials Warn of Sticky Inflation
A slew of Fed officials also warned that sticky inflation would prevent early interest rate cuts. The dollar surged to three-month highs earlier in the week but fell slightly in overnight trade.
Asian Currencies’ Movement in Asian Trade
The yuan and the rupee both had minimal movement in Asian trade, remaining within sight of their highest level since mid-November.
Yen’s Performance Amidst Intervention Watch and Recession
The Japanese yen rose 0.2% on Thursday, hovering around its weakest level since November. Its further losses were held back by a slew of Japanese officials watching for drastic moves in the yen, which could herald currency market intervention. Japan’s economy unexpectedly contracted in the fourth quarter, entering a technical recession as private spending weakened further.
Impact on Bank of Japan’s Plans
The weakness in the economy cast doubts over the Bank of Japan’s plans to begin raising interest rates in 2024. Analysts at ING said the trend was likely to delay the BOJ’s plans, with expectations of a hike by June.
Concerns Over U.S. Rates Weigh on Asian Currencies
Despite Thursday’s strength, the yen was still the worst-performing Asian currency this week, amid growing concerns over higher-for-longer U.S. rates, which have weighed on the Japanese currency over the past two years. Broader Asian currencies moved in a flat-to-low range, nursing steep losses this week as U.S. rate concerns dented sentiment towards the region.
Australian and Indonesian Currencies’ Movement
The Australian dollar fell 0.1% and hovered near three-month lows as data showed that Australia’s inflation cooled further in January—a trend that gives the Reserve Bank lesser impetus to hike interest rates further. The rupiah fell 0.4%, ducking a rally in the stock market after Defence Minister Prabowo Subianto appeared poised to win the country’s presidency.
