Home ForexArticles Asian currencies remain weak and dollar nears one-month highs on doubts over first rate cuts By Investing.com

Asian currencies remain weak and dollar nears one-month highs on doubts over first rate cuts By Investing.com

by SuperiorInvest

© Reuters.

Investing.com– Most Asian currencies were little moved on Thursday after posting heavy losses in the previous session, while the dollar fell slightly from a one-month high, as strong U.S. retail sales data raised more doubts about the Federal Reserve’s first rate cuts.

Sentiment toward Asian markets remained weak after weaker-than-expected Chinese data showed the region’s largest economy struggling with a slow post-COVID recovery.

It remained stable after sinking to its lowest level in almost two months. But further losses in the currency were limited by a stronger-than-expected midpoint correction by the People’s Bank of China.

Still, the outlook for the yuan remains bleak, as the People’s Bank of China faces slow growth and limited room to continue supporting the currency.

Concerns about China weighed on most Asian currencies, given the country’s dominance as the region’s trading hub.

It rose 0.3% on Thursday after falling to a more than one-month low in the previous session.

showed Australian employment fell unexpectedly in December, although the broader labor market still remained relatively tight.

The dollar, which also has significant trade exposure to China, rose slightly after hitting a two-month low on Wednesday, while stabilizing near a two-month low.

It stabilized at a one-and-a-half-month low ahead of key data (CPI) due on Friday, which is expected to show a sustained decline in inflation. The reading is expected to give the Bank of Japan little impetus to begin tightening its ultra-loose policy, which bodes poorly for the yen.

The yen was among the worst-performing Asian currencies in 2023, with a widening gap between US and Japanese interest rates acting as a key pressure point. This trend is likely to continue in the near term as traders further trimmed expectations of early interest rate cuts from the Federal Reserve.

They rose 0.1% from a two-and-a-half-month low, while remaining near record lows.

Dollar stabilizes near one-month highs as bets on early rate cut ease

The y fell between 0.1% and 0.2% in Asian trading, after posting a strong rally earlier this week.

December’s data came in stronger than expected, lending more credence to recent comments by Federal Reserve officials that the bank will keep rates high for longer.

The retail sales data came after stronger CPI inflation and nonfarm payrolls readings for December. The strength of the U.S. economy gives the Federal Reserve more room to keep rates high for longer.

The data also caused traders to further reduce their bets on a rate cut by the Federal Reserve in March, according to the . Traders now estimate a 61.8% probability of a 25 basis point cut in March, up from 67.3% seen a week ago.

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