Asian Currencies and Dollar React to Economic Readings and Fed Comments
Most Asian currencies remained stable, while the dollar experienced a slight decline on Monday, with the focus shifting to upcoming economic readings and Federal Reserve comments to gauge potential interest rate adjustments.
Regional Market Pressures
Weak risk appetite continued to put pressure on regional markets as the focus remained on potential escalation in the Middle East conflict.
Bank of Japan Meeting and Chinese Yuan Resilience
The yen fell by 0.2% as expectations persisted that the Bank of Japan would maintain its ultra-dovish policy. The Chinese yuan remained resilient after the People’s Bank of China opted to keep medium-term lending rates unchanged, indicating potential stability for the currency.
Chinese GDP and Economic Recovery Concerns
The upcoming Chinese GDP data is expected to reveal growth surpassing the government’s 5% target for 2023, but concerns over a slowing post-COVID economic recovery continue to weigh on the yuan.
Broader Asian Currency Movement
Broader Asian currencies showed minimal movement as markets awaited further cues on the path of U.S. monetary policy. The Australian dollar rose by 0.1%, while the South Korean won fell by 0.6%. The Taiwan dollar remained stable following the presidential election results, and the Indian rupee steadied after recovering from near record lows.
Market Expectations of Early Interest Rate Cuts
The dollar and euro both experienced slight declines as market expectations remained consistent with early interest rate cuts by the Federal Reserve. This was reinforced by data showing a bigger-than-expected rise in U.S. inflation in December, prompting focus on upcoming addresses from a string of Fed officials to provide more cues on the bank’s plans.
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