Fed Rate Cut Bets Persist, Asian Currencies Steady
Most Asian Currencies Steady, Dollar Near 4-Month Low
Asian currencies stabilized on Wednesday, with the dollar hovering near four-month lows. Traders maintained their bets on an early 2024 interest rate cut by the Federal Reserve.
Traders Remain Optimistic Amid Fed’s Warnings
Despite warnings from Fed officials, traders remained optimistic about early rate cuts, prompting a decline in the dollar and Treasury yields. This sentiment indicated growing confidence in the possibility of rate cuts as early as March 2024.
Risk-Driven Assets Boosted by Rate Cut Speculation
Most risk-driven assets received a boost, with Asian units such as the and the edging up by 0.1% to 0.2%. These units were also trading close to five-month highs, driven by the expectation of early rate cuts.
March 2024 Seen as Start of Easing Cycle
Broader Asian currencies also experienced slight gains, reflecting a positive trend over the past week following the Fed’s indication of halting rate hikes and initiating rate cuts in 2024.
Speculation Mounts Over Multiple Rate Cuts in 2024
Speculation intensified with Goldman Sachs predicting five cuts in 2024, primarily in the first half of the year. Traders were seen pricing in over a 67% chance for a 25 basis point cut in March 2024, with expectations of further cuts in April and May.
Chinese Yuan Lags as PBOC Maintains Rates
The fell against the dollar as the People’s Bank of China left its unchanged at record lows. This move underscored the limited room for policy adjustments to support China’s economic recovery.
Yen’s Weakness Amid Ultra-Dovish Stance
The was flat after a sharp decline from near four-month highs, reflecting the maintaining its ultra-dovish stance without immediate plans to tighten policy in 2024. Weak and data also contributed to the yen’s weakness.
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