Asia FX muted, dollar slides from near 5-mth highs amid rate uncertainty

Asia FX muted, dollar slides from near 5-mth highs amid rate uncertainty

Asia FX


Most Asian currencies moved little on Thursday, seeing little support even as the dollar fell sharply from near five-month highs as uncertainty over the path of U.S. interest rates remained in play.

Regional trading volumes were also muted with market holidays in China and Hong Kong.

Dollar sinks from near 5-mth highs after Powell comments

The dollar index and dollar index futures fell slightly in Asian trade, extending steep overnight losses after Federal Reserve Chair Jerome Powell offered up mixed signals on U.S. interest rate cuts.

While Powell said the Fed will eventually cut interest rates later this year, he offered scant cues on the timing and scale of the potential cuts. Powell also said the central bank will need more confidence that inflation was moving towards its 2% annual target.

Powell’s comments came just ahead of key nonfarm payrolls data for March, which is due on Friday. Sticky inflation and strength in the labor market are the Fed’s two biggest considerations for potentially cutting interest rates.

Before the labor data, focus is also on addresses by other members of the Fed’s rate-setting committee. FOMC members Michelle Bowman and Thomas Barkin are set to speak at separate events later on Thursday.


USDJPY hovers near 152 amid intervention threats

The Japanese yen moved little on Thursday, although the USDJPY remained close to highs last seen in 1990.

This proximity to 34-year highs, which were above the 152 level for USDJPY, kept markets on edge over any potential government intervention in currency markets.

A slew of top Japanese officials had warned markets over speculating against the yen, and that they would not rule out any measures to bring down the USDJPY pair.

Breaches of 152 had attracted record-high levels of intervention by the Japanese government in 2022.

Broader Asian currencies drifted in a flat-to-high range, amid Chinese market holidays and anticipation of more cues on U.S. interest rates.

The Chinese yuan remained fragile, with the offshore USDCNH pair remaining well above the closely watched 7.2 level.

The Australian dollar’s AUDUSD pair rose 0.2%, tracking some strength in commodity prices, while the South Korean won’s USDKRW pair rose 0.3%.

The Singapore dollar’s USDSGD pair tread water, while the Indian rupee’s USDINR pair remained close to record highs above the 83 level.

Focus was also on a Reserve Bank of India meeting on Friday, where the bank is widely expected to keep rates unchanged. But any comments on inflation and economic growth will be closely watched, especially ahead of the 2024 Indian general election.

The headline tells you about the value of various Asian currencies (FX) and the US dollar (USD) relative to each other. Here’s a breakdown:

  • Asian FX muted: The currencies of most Asian countries aren’t showing significant changes in value (muted).
  • Dollar slides: The US dollar is weakening (sliding) against other currencies. This comes after it reached its highest point in nearly 5 months (near 5-mth highs).
  • Rate uncertainty: The reason for the dollar’s weakness is uncertainty about future US interest rates.

Additional points:

  • The lack of strong movement in Asian currencies might be due to holidays in some major markets like China.
  • Some currencies, like the Australian dollar and South Korean won, did see some gains.
  • The Chinese yuan remains a bit fragile.

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