Asia FX Treads Water, Dollar Edges Lower Before CPI Test
Most Asian Currencies Tread Water Amid Limited Trading Volumes
Most Asian currencies moved in a tight range on Monday due to market holidays across the region, resulting in limited trading volumes. The dollar also fell slightly ahead of key inflation data expected later this week.
Market Closures Impact Currency Movements
Markets in China, Singapore, South Korea, and Hong Kong were closed for the Lunar New Year holiday, with Japanese markets also closed for a memorial day. As a result, most regional currencies saw limited moves, while traders remained cautious ahead of the U.S. inflation reading.
Impact on Regional Currencies
The Indian rupee fell 0.1% in offshore trade, while the Thai baht and Malaysian ringgit also lost 0.1% each. The Philippine peso remained flat before key Consumer Price Index (CPI) inflation data due on Tuesday, with expectations of inflation remaining sticky.
Dollar Creeps Lower Amid Anticipation of CPI and Fed Comments
The dollar and euro both fell 0.1% each in Asian trade as traders awaited U.S. interest rate cues this week. The CPI data, expected to show some easing in inflation, is likely to keep price pressures relatively sticky, potentially influencing the Federal Reserve’s approach to interest rates.
Impact on Asian Currencies
Waning bets on early monetary loosening by the Fed have battered Asian currencies in recent sessions, keeping the dollar within sight of a three-month peak. This trend has led to increased volatility in the Asian currency market.
Japanese Yen Hovers at 2-½ Month Low on Dovish BOJ
The Japanese yen remained steady on Monday, nursing steep losses from the past week due to comments from Bank of Japan Deputy Governor Shinichi Uchida. Uchida indicated that any scaling back of the bank’s ultra-dovish stance would be gradual, affecting the performance of the yen in the currency market.
Yen’s Performance and Market Impact
The yen traded close to its weakest level since late-November, reflecting its status as the worst-performing Asian currency in 2024. The growing rift between local and U.S. interest rates over the past two years has further compounded the yen’s challenges in the market.
