😎 Summer Sale Exclusive - Up to 50% off AI-powered stock picks by InvestingProCLAIM SALE

Asia FX upbeat, dollar at 4-mth low as markets look to 2024 rate cuts

Published 12/14/2023, 11:59 PM
© Reuters.
USD/JPY
-
AUD/USD
-
USD/INR
-
USD/KRW
-
USD/CNY
-
DX
-
DXY
-

Investing.com-- Most Asian currencies steadied after a recent rally on Friday, while the dollar languished at four-month lows as traders positioned for deeper-than-expected interest rate cuts by the Federal Reserve in 2024.

More stimulus measures in China also aided sentiment, as the People’s Bank of China injected 1.45 trillion yuan ($200 billion) into the economy through its medium-term lending facility.

But the move offered little support to the yuan, given that it signals that the PBOC will keep its loan prime rate at record lows next week. The currency traded sideways on Friday.

Economic data also offered some positive cues on China. Industrial production grew more than expected in November, although retail sales and fixed asset investment missed expectations.

Still, weakness in the dollar kept the yuan trading near a six-month high.

Broader Asian currencies advanced slightly, tracking a weaker dollar and as the prospect of lower U.S. interest rates drove investors into risk-driven, high-yield assets.

The Australian dollar- a major indicator of Asian risk sentiment- rose 0.3% to an over four-month high.

The Japanese yen steadied near a four-month high to the dollar, having appreciated sharply against the greenback in recent sessions. But further gains in the yen were uncertain, with the Bank of Japan expected to maintain its ultra-dovish stance in its final meeting for the year on the coming Tuesday.

Purchasing managers index data pointed to more weakness in the Japanese economy, with a preliminary reading for December showing a deeper-than-expected contraction in manufacturing activity.

Among the few outliers for the day, South Korea’s won fell 0.2% after a strong run this week, while the Indian rupee hovered near record lows, having moved little against a weaker dollar.

While optimism over India’s economy drove local stocks to record highs, traders remained wary of the rupee on caution over India’s massive trade deficit. The Reserve Bank has also signaled no more interest rate hikes, despite a recent uptick in inflation.

Dollar languishes at 4-mth low, rate cuts in focus

The dollar index and dollar index futures fell slightly in Asian trade and were at their weakest levels since mid-August.

The greenback was set to lose about 2% this week after the Fed said it was done raising interest rates, and projected deeper rate cuts in 2024.

The Fed’s comments also spurred deep losses in U.S. Treasury yields, and diminished the dollar’s appeal as traders began speculating over just when the Fed will begin trimming interest rates.

Fed fund futures prices show traders pricing in an over 70% chance for a rate cut in March 2024. Goldman Sachs expects the central bank to enact three, back-to-back 25 basis point cuts, beginning in March.

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.