Unlock Premium Data: Up to 50% Off InvestingProCLAIM SALE

Asia FX dips, dollar steady as sticky inflation clouds Fed outlook

Published 12/12/2023, 11:49 PM
© Reuters.
USD/JPY
-
AUD/USD
-
USD/SGD
-
USD/INR
-
USD/KRW
-
USD/CNY
-
USD/MYR
-
DX
-
DXY
-

Investing.com-- Most Asian currencies retreated on Wednesday, while the dollar steadied as sticky U.S. inflation data cast some doubts over what the Federal Reserve will signal at the conclusion of a meeting later in the day.

Regional currencies were nursing some losses in recent sessions, as the dollar rebounded on signs of resilience in the U.S. labor market. Data for November also showed a mild uptick in inflation, indicating that the U.S. economy may not be cooling as rapidly as the Fed was anticipating.

This notion weighed on most Asian currencies, as did persistent concerns over an economic slowdown in China.

The Chinese yuan lost 0.1%, extending losses after a dismal reading on inflation over the weekend. China slid further into disinflation territory in November, indicating that economic conditions in the country remained weak.

The Japanese yen shed 0.1%, having reversed much of a recent rally after media reports showed the Bank of Japan was in no hurry to tighten its ultra-dovish policy.

A Bank of Japan meeting is also due next week, although the central bank is expected to signal no changes to negative interest rates.

The Australian dollar shed 0.1%, while the Singapore dollar lost 0.2%.

Caution before the Fed saw risk-heavy Asian currencies log steeper losses. The South Korean won fell 0.4%, while the Malaysian ringgit led losses across Southeast Asia with a 0.5% fall.

The Indian rupee was flat, having taken few cues from a strong inflation reading for November. But the reading was largely in line with a Reserve Bank of India warning that inflation will increase in the coming months, due to higher food prices.

Fed set to hold interest rates, but outlook uncertain

The dollar index and dollar index futures rose slightly in Asian trade.

Markets remained convinced that the Fed will leave interest rates unchanged later on Wednesday.

But strong labor market and sticky inflation readings brewed some uncertainty over what the central bank’s outlook is for 2024. Nonfarm payrolls rose more than expected in November, while consumer inflation inched up and remained well above the Fed’s 2% annual target.

Traders were seen scaling back bets on a March interest rate cut, amid growing concerns that Fed Chair Jerome Powell could reiterate the bank’s higher-for-longer rhetoric.

Any hawkish signals from the Fed are likely to spur a sharp unwinding in risk-driven assets, which had rallied sharply over the past month amid optimism over a Fed pivot.

Upgrade your investing with our groundbreaking, AI-powered InvestingPro+ stock picks. Use coupon INVSPRO2024 to avail a limited time discount on our Pro and Pro+ subscription plans. Click here to know more, and don't forget to use the discount code when checking out!

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.