Investing.com — Most Asian currencies stayed within a tight range on Thursday, posting overnight losses as minutes from the Federal Reserve’s recent meeting boosted the dollar amid growing concerns about a longer interest.
Sentiment towards most Asian markets was also battered by the prospect of a new trade war between the US and China, after China retaliated against the imposition of higher US tariffs on key business sectors. Chinese military exercises near Taiwan also scared traders.
Dollar strong after Fed minutes increase interest rate fears
The and both were steady in Asian trading after strong overnight gains.
The minutes of the Fed’s meeting in late April showed that policymakers were increasingly concerned about persistent inflation, and that some Fed officials were also willing to raise rates further to reduce inflation.
The minutes were preceded by a series of separate speeches from Fed officials that persistent inflation would likely delay potential rate cuts.
While it is still considered unlikely that the Fed will raise rates further, markets are now pricing in a greater likelihood that the central bank will keep rates high for longer – a scenario that does not bode well for risk-driven Asian markets.
The dollar rose on this outlook, trading at a one-week high.
Most Asian currencies recorded sharp declines against the dollar, remaining somewhat stable on Thursday. The Australian dollar pair rose 0.2% after falling 0.7% on Wednesday. The Purchasing Managers Index data showed some cooling.
The Japanese yen pair moved little on Thursday, after rising nearly 157 yen in overnight trading. PMI data for Japan rose for the first time in eleven months.
The South Korean won pair fell 0.1% after interest rates held steady as expected, but also slightly raised its economic growth forecast for the year.
The Singapore dollar pair fell 0.1% after data reconfirmed that first-quarter growth was slightly slower than expected.
Chinese Yuan Weak, USDCNY Returns to Six-Month High
The Chinese yuan pair rose slightly on Thursday, trading just below a six-month high.
Beijing was seen banning certain US companies from engaging in trade activities involving China, while also banning certain arms shipments to Taiwan. The move was seen as retaliation for higher US tariffs on key Chinese industries, which will come into effect from August 1.
China also conducted military exercises near Taiwanese territory, raising concerns about heightened tensions in the area.
