Investing.com– Most Asian currencies weakened on Tuesday, while the dollar strengthened as markets dug in ahead of key U.S. inflation data that is expected to influence the path of interest rates. interest.
The inflation data comes after a chorus of Federal Reserve officials warned that the central bank was in no rush to start cutting interest rates in 2024, a trend that bodes well for the dollar and bodes poorly for high-yield and high-risk currencies.
A week-long trade holiday in China and Hong Kong kept Asian trade volumes low. But foreign trade fell slightly.
Japanese yen approaches 150 level on dovish signals from BOJ
The yen was among the worst-performing regional units in recent sessions, losing 0.1% on Tuesday and trading at 149.53, a nearly three-month low and just a hair away from breaking above the 150 level, boding more losses for the yen.
The losses in the yen mainly came after a senior Bank of Japan official noted that even when the bank begins raising interest rates this year, it was unlikely to raise them aggressively. This scenario presents little relief for the yen, which was mainly pressured by a widening gap between local and US interest rates, a trend that is compounded by the prospect of higher US rates for longer.
Data due out this Friday is expected to show limited improvement in growth, after an unexpected contraction in the third quarter.
Asian currencies generally trended lower. They lost 0.3% and traded near a three-month low. A private survey showed Australia recovered to a 10-month high in early February, amid greater optimism about reducing inflation and no more interest rate rises.
It remained stable, while it lost 0.1%.
Data on Monday showed that Indian inflation (CPI) declined as expected in January, but remained well above the Reserve Bank of India's 4% annual target.
Dollar rises, waiting for CPI data to find signs of rate cuts
The and rose 0.1% each in Asian trade, and remained within sight of a recent three-month high as traders looked ahead to interest rate cuts later this year.
Inflation is expected to have eased in January but remained well above the Federal Reserve's 2% annual target, giving the bank little impetus to start cutting interest rates early.
The dollar had soared in late January as traders began sharply reducing bets that the Federal Reserve would begin cutting interest rates in March and May. Markets showed there is only a 45.4% chance of a 25 basis point cut in June.