🔮 Better than the Oracle? Our Fair Value found this +42% bagger 5 months before Buffett bought itRead More

Asia FX nurses losses as dollar hits 10-day high on easing rate cut bets

Published 05/24/2024, 12:11 AM
© Reuters

Investing.com-- Most Asian currencies fell on Friday and were nursing steep losses against the dollar as hawkish signals on inflation and interest rates saw traders further price out expectations for rate cuts in 2024.

Sentiment towards Asian markets was also rattled by signs of a resurgent U.S.-China trade war, while the People’s Liberation Army was seen conducting extended military drills near Taiwan, ramping up tensions with Taipei.

Dollar at 10-day high as Sept rate cut bets ease 

But the biggest source of pressure on Asian currencies was a rebound in the dollar, with the dollar index and dollar index futures steadying at 10-day highs on Friday. 

The minutes of the Federal Reserve’s late-April meeting, coupled with several hawkish comments from Fed officials, saw investors grow more wary of sticky inflation, which could in turn delay any plans by the central bank to begin trimming interest rates.

This saw traders largely price out expectations for an interest rate cut in September. 

The CME Fedwatch tool showed traders were pricing a nearly equal probability of a cut and a hold- around 46%- in September. Earlier expectations had shown an over 50% chance of a cut. 

Japanese yen weakens, soft CPI offers little relief 

The Japanese yen’s USDJPY pair rose 0.1% on Friday to an over three-week high, extending a rebound from lows hit in the immediate wake of government intervention seen earlier in May.

The yen took little relief from consumer price index data which showed inflation eased as expected in April, as spending remained weak. The reading raised more questions about just how much headroom the Bank of Japan has to tighten policy further, presenting more headwinds for the yen.

Chinese yuan losses limited by stronger PBOC fix

The Chinese yuan’s USDCNY pair rose 0.05% on Friday, with further weakness in the yuan being limited by a substantially stronger midpoint fix from the People’s Bank of China. 

The stronger fix came as a simmering trade war with the U.S., doubts over more stimulus measures and increased tensions with Taiwan presented a wave of selling pressure for the yuan.

The USDCNY pair was close to a six-month high. 

Broader Asian currencies retreated. The South Korean won’s USDKRW pair rose 0.3%%, while the Singapore dollar’s USDSGD pair rose 0.1%.

The Australian dollar’s AUDUSD pair fell 0.2%. Most regional currencies were headed for steep weekly losses as the prospect of high for longer U.S. interest rates presented more pressure.

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.