Asia FX weak as dollar surges to 1-year high on sticky inflation; Powell awaited

Investing.com – Most Asian currencies weakened on Thursday as the U.S. dollar reached a one-year high, bolstered by data showing persistent inflationary pressure in the U.S. Market sentiment in the region remained subdued, following disappointing Chinese stimulus measures and concerns over potential U.S. protectionism under a Donald Trump presidency.

The Japanese yen and the Chinese yuan were among the hardest-hit currencies, reflecting broader regional losses in the past week as traders flocked to the dollar.

Dollar Hits One-Year High After CPI Data; Powell’s Speech in Focus

The Dollar Index and dollar futures both rose nearly 0.2% in Asian trading, continuing sharp gains from the previous session.

October’s consumer price index (CPI) data was in line with expectations, showing that while the headline CPI increased from the previous month, core CPI remained sticky and well above the Federal Reserve’s 2% annual target.

While the data fueled expectations of a 25-basis-point rate cut by the Fed in December, the long-term outlook for U.S. interest rates became more uncertain. The market also adjusted its rate expectations due to the outcome of Donald Trump’s election, with traders betting on more expansionary policies during his second term, including tax cuts and trade tariffs.

The focus now turns to Fed Chair Jerome Powell’s address later on Thursday, with traders hoping to gain further clarity on future interest rate decisions. Powell had previously emphasized the Fed’s data-driven approach to monetary policy following a 25-basis-point rate cut last week.

Australian Dollar Hits 3-Month Low After RBA Comments and Job Data

The Australian dollar weakened by 0.1%, reaching a three-month low against the U.S. dollar, after Reserve Bank of Australia Governor Michele Bullock signaled that interest rates would remain on hold for the time being. She stated that rates would stay steady until the RBA was confident that inflation was easing.

Bullock’s comments were accompanied by disappointing October jobs data, which showed a slowdown in Australia’s job market after six consecutive months of strong growth. This has led analysts to predict that the RBA could start cutting rates as early as the first quarter of 2025, as inflationary pressures ease.

Broader Asian Currencies Weaken Amid Economic Uncertainty

Across the broader Asian market, most currencies weakened on Thursday and continued to suffer steep losses in recent sessions.

The Japanese yen fell 0.3% to 155.85 yen per U.S. dollar, reaching its highest level in more than three months. The yen is approaching levels that have previously triggered currency market interventions by the Japanese government.

Similarly, the Chinese yuan saw a 0.3% decline, hitting its highest level in over three months against the dollar. The yuan has been pressured by lackluster Chinese stimulus measures and growing concerns over the prospect of higher U.S. trade tariffs under a Trump administration.

Other Asian currencies also saw losses:

  • The South Korean won rose 0.1% against the dollar.
  • The Singapore dollar gained 0.2%.
  • The Indian rupee steadied after hitting a record high of over 84.6 rupees to the dollar earlier this week.

Leave a Comment

Your email address will not be published. Required fields are marked *