Dollar Steadies Amid Growing Belief in Fed Rate Cuts
Asian Currencies Find Stability
Most Asian currencies stabilized after experiencing robust gains on Monday, while the dollar maintained its recent losses. This trend comes as more people are convinced that the Federal Reserve will halt its interest rate hikes and instead opt for cuts in early 2024.
Japanese Yen and Chinese Yuan
The Japanese yen held steady around 146.76 against the dollar, nearing its strongest level since mid-September. Additionally, all eyes are on an upcoming report on the Bank of Japan’s monetary policy plans.
The Chinese yuan remained flat after a strong recovery against the dollar in recent weeks, with support from the People’s Bank’s strong midpoint fixes. However, concerns lingered over China’s economy following weak purchasing managers index readings for November.
Indian Rupee and Australian Dollar
The Indian rupee fell 0.5% after substantial gains over the past month, while the Australian dollar remained flat, despite a rally in domestic stocks. The Reserve Bank of India is expected to keep rates unchanged, while the Reserve Bank of Australia is anticipated to cut rates in its upcoming meeting.
Fed Rate Cut Bets Grow
The dollar and euro saw a slight increase but remained close to lows last seen in early-August. Fed Chair Jerome Powell’s recent comments have fueled expectations for a less hawkish Fed in the coming months.
Markets are now pricing in a high probability that the Fed will keep rates on hold and even begin to cut them. However, these expectations are contingent on inflation and labor market data, which are set to offer further cues on the future direction of the economy.
Stellar Gains in Asian Currencies
The prospect of a less hawkish Fed has led to significant gains in Asian currencies throughout November, while the dollar has faced a decline. This shift in sentiment is likely to continue shaping the currency markets in the near future.
