⌛ Did you miss ProPicks’ 13% gains in May? Subscribe now & catch June’s top AI-picked stocks early.Unlock Stocks

Asia FX retreats, Australian dollar down as RBA holds rates

Published 04/04/2023, 01:01 AM
Updated 04/04/2023, 01:28 AM
© Reuters
USD/JPY
-
AUD/USD
-
USD/THB
-
USD/INR
-
USD/KRW
-
USD/CNY
-
DX
-
DXY
-

By Ambar Warrick

Investing.com -- Asian currencies inched lower on Tuesday amid growing uncertainty over economic growth this year, while the Australian dollar retreated after the Reserve Bank held interest rates and signaled that inflation had likely peaked.

The Australian dollar lost 0.3% after the RBA held interest rates at 3.60% in a closely-watched decision. The bank said that it was waiting to observe the full effects of its year-long rate hike cycle on the economy, and that inflation had likely peaked after touching an over 30-year high in December.

While inflation eased for two consecutive months from a December peak, it was still well above the RBA’s 2% to 3% target range. To this end, the central bank warned that more rate increases could still be in order to bring down stubborn inflation.

Still, the prospect of rates remaining steady weighed on the Australian currency, as did a warning on economic growth from the RBA.

Broader Asian currencies crept lower, while the U.S. dollar nursed overnight losses after a raft of weak manufacturing data and a spike in oil prices ramped up uncertainty over economic growth this year.

The Chinese yuan fell 0.1% as data on Monday showed that a recovery in the country’s manufacturing sector was running out of steam on weakening global demand.

Weak manufacturing data from Japan also weighed on the yen, which fell 0.3% as manufacturing activity remained in contraction territory for five straight months.

The dollar index and dollar index futures were flat on Tuesday after falling in overnight trade, as softer-than-expected manufacturing activity data pointed to a middling outlook for the U.S. economy.

This saw markets reassess how much economic headroom the Federal Reserve will have to keep raising interest rates, even as a spike in oil prices pointed to higher fuel prices, which could in turn buoy inflation.

While the prospect of a less hawkish Fed is positive for Asian currencies, investors remained wary of risk-heavy assets amid growing economic uncertainty.

The Thai baht fell 0.2%, while the Indian rupee and South Korean won lost 0.1% and 0.4%, respectively. The won was also pressured by slightly softer-than-expected inflation data, which lends further credence to the Bank of Korea’s decision to halt interest rate hikes earlier this year.

Focus this week is now on U.S. nonfarm payrolls data, due Friday, for more cues on monetary policy. An Indian interest rate decision is also awaited, with the Reserve Bank expected to hike interest rates once again.

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.