Asian Currencies Remain Muted Ahead of Key U.S. Economic Readings
Most Asian currencies maintained a narrow range on Tuesday as markets awaited several important U.S. economic reports. The Japanese yen also stayed near seven-week lows following the Bank of Japan’s dovish stance.
Tight Trading for Asian Currencies
Asian currencies were mostly subdued as the dollar showed some weakness but remained close to a one-month high. The dollar’s relative strength kept most Asian currencies in check, with expectations of delayed interest rate cuts by the Federal Reserve further impacting market sentiment.
Chinese Yuan’s Performance
The Chinese yuan was a standout performer, rising 0.3% from a two-month low amid reports of the People’s Bank of China selling dollars in open markets to support the currency. The yuan also benefited from a stronger-than-expected midpoint fix by the PBOC, although overall sentiment towards the Chinese economy remained pessimistic.
BOJ’s Dovish Stance and Yen Weakness
The Japanese yen hovered near seven-week lows after the Bank of Japan remained dovish and forecasted lower inflation for fiscal 2024. The ultra-dovish policies of the central bank widened the gap between local and U.S. interest rates, leading to further weakness in the yen.
Other Asian Currencies
Other Asian currencies remained within a muted range, with the Korean won recovering from a seven-week low and the Thai baht steadying above record lows. South Korean data showed a mild pick-up in exports through December.
U.S. Dollar and Rate-Cut Expectations
The U.S. dollar saw slight weakness in Asian trade, but remained close to over one-month highs. Expectations for a delay in U.S. interest rate cuts led to a growing conviction that the Fed will keep rates steady in March, with key economic readings expected to provide further clarity on the situation.
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