Most Asian currencies experienced a decline on Friday, while the US dollar stabilized following recent declines. This occurred as hawkish signals from the Federal Reserve and robust US labor data raised doubts about potential early US rate cuts.
In Asian trade, both the dollar index and dollar index futures showed minimal movement, set for modest weekly losses after retreating from three-month highs earlier in the week.
Despite these losses, the outlook for the greenback remained positive, supported by indications that the Fed intends to maintain higher interest rates for an extended period.
Fed Governor Christopher Waller's comments late Thursday reinforced the hawkish stance, stating the need for more evidence of cooling inflation before considering rate cuts.
This sentiment echoed other Fed officials' views expressed earlier in the week and aligned with the minutes of the late-January meeting. Additionally, robust labor market data, with unexpected falls in jobless claims, diminished the case for early rate cuts.
Anticipations of prolonged higher US rates had a negative impact on Asian markets, contributing to a decline in most regional currencies throughout the week. Traders, as indicated by the CME Fedwatch tool, adjusted expectations for potential rate cuts in May and June.
While a market holiday in Japan limited regional trading volumes on Friday, the yen remained above 150 against the dollar. Japanese ministers issued warnings on potential intervention measures, considering the persistent concerns about the Japanese economy entering a recession in the fourth quarter of the previous year. The possibility of intervention remained, especially if the yen's weakness persists.
Other Asian currencies faced varying movements: the Chinese yuan edged lower amid speculation about additional stimulus from Beijing, the South Korean won declined by 0.2%, and the Singapore dollar remained stable before key inflation readings. Conversely, the Australian dollar saw a 0.2% gain, extending its rebound from three-month lows.
The Indian rupee remained flat but distanced itself from the 83 level, supported by positive sentiment following a strong purchasing managers index reading for the service sector released on Thursday.
Paraphrasing text from "Investing" all rights reserved by the original author.
