🚀 AI-picked stocks soar in May. PRFT is +55%—in just 16 days! Don’t miss June’s top picks.Unlock full list

Asia FX falls; dollar muted as rate hikes, economic readings in focus

Published 04/24/2023, 12:38 AM
Updated 04/24/2023, 12:53 AM
© Reuters.
USD/JPY
-
AUD/USD
-
USD/INR
-
USD/KRW
-
USD/CNY
-
DX
-
DXY
-

By Ambar Warrick

Investing.com -- Most Asian currencies retreated on Monday, while the dollar steadied ahead of a string of economic cues due this week, with the Federal Reserve’s May meeting also coming into focus as markets braced for more interest rate hikes.

The dollar index and dollar index futures traded sideways on Monday after logging some gains last week, as a slew of Fed officials called for higher interest rates to curb inflation.

Focus this week is on the impact of said rate hikes on the U.S. economy, with first-quarter GDP data due on Thursday. The reading is expected to show that growth slowed from the prior quarter.

The PCE price index - the Fed’s preferred inflation gauge - is also due later this week, and is expected to show that inflation remained stubborn through March.

Relatively high inflation is expected to elicit an at least 25 basis point (bps) rate hike by the Fed, when it meets next week. Markets are pricing in a nearly 90% chance of such a hike, with a small possibility for a similar 25 bps hike in June.

The prospect of rising interest rates weighed on most Asian currencies. The Japanese yen fell 0.2% on Monday, with markets awaiting more cues on Japanese inflation due this week.

But the main point of focus for the yen is a Bank of Japan policy meeting on Friday - the first under new Governor Kazuo Ueda. Ueda is expected to maintain the bank’s ultra-loose policy for now, but could provide cues on an eventual plan to tighten, especially as inflation remains stubborn.

The South Korean won lost 0.4% ahead of first quarter GDP data on Tuesday, which is expected to show that growth remains dismal in the East Asian economy.

The Chinese yuan fell 0.2% to 6.9038 against the dollar, coming close to the key 7 level amid growing doubts over the scope of an economic recovery in the country this year. The Australian dollar lost 0.3% ahead of more signals on inflation due this week, as well as a Reserve Bank meeting in early-May.

Uncertainty over a Chinese economic recovery has also dented sentiment towards Asia in recent weeks.

The Indian rupee fell slightly, but was sitting on some gains from Friday after data showed that India’s foreign exchange reserves rose to an over nine-month high in the second week of April.

Still, the prospect of rising U.S. interest rates bodes poorly for Asian currencies, as the gap between risky and low-risk yields narrows.

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.