Asian Currencies Steady, Dollar at 4-Month Low Amid Rate Cut Expectations
Asian Currencies Stabilize as Dollar Lingers at Four-Month Lows
Most Asian currencies steadied after a recent rally on Friday, while the dollar languished at four-month lows as traders positioned for deeper-than-expected interest rate cuts by the Federal Reserve in 2024.
China’s Stimulus Measures Aid Market Sentiment
More stimulus measures in China also aided sentiment, as the People’s Bank of China injected 1.45 trillion yuan ($200 billion) into the economy through its medium-term lending facility.
Positive Cues on China’s Economic Data
Economic data also offered some positive cues on China. Growth in November exceeded expectations, although industrial output and retail sales missed expectations.
Weakened Dollar Keeps Yuan Near Six-Month High
Still, weakness in the dollar kept the yuan trading near a six-month high. Broader Asian currencies advanced slightly, tracking a weaker dollar and as the prospect of lower U.S. interest rates drove investors into risk-driven, high-yield assets.
Yen Steadies Near Four-Month High as Fed Meeting Approaches
The yen steadied near a four-month high to the dollar, but further gains were uncertain as the Bank of Japan was expected to maintain its ultra-dovish stance in its final meeting for the year on the coming Tuesday.
India’s Economy Drives Local Stocks to Record Highs, But Traders Remain Wary
While optimism over India’s economy drove local stocks to record highs, traders remained wary of the rupee on caution over India’s massive trade deficit.
Dollar Languishes at 4-Month Low, Rate Cuts in Focus
The dollar was set to lose about 2% this week after the Fed said it was done raising interest rates, and projected deeper rate cuts in 2024.
Speculation Over Fed Rate Cuts and Market Response
The Fed’s comments spurred deep losses in U.S. Treasury yields, and diminished the dollar’s appeal as traders began speculating over just when the Fed will begin trimming interest rates. Traders are pricing in an over 70% chance for a rate cut in March 2024.
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