Investing.com — Most Asian currencies fell on Friday, posting steep losses against the dollar, as aggressive signals on inflation and interest rates caused traders to further price out expectations for rate cuts in 2024.
Sentiment towards Asian markets was also shaken by signs of a resurgence of trade war between the US and China, while the People’s Liberation Army conducted extensive military exercises near Taiwan, raising tensions with Taipei.
Dollar is at 10-day high as September rate cuts ease
But the biggest source of pressure on the Asian currency has been a recovery in the dollar, with the greenback stabilizing at a 10-day high on Friday.
The minutes of the Federal Reserve’s late April meeting, coupled with several hawkish comments from Fed officials, have made investors more wary of persistent inflation, which in turn could undermine any central bank plans to cut rates. could delay.
As a result, traders largely priced out expectations for a rate cut in September.
The traders shown estimate an almost equal probability of a cut and a hold in September, around 46%. Previous expectations had shown a more than 50% chance of a cut.
The Japanese yen is weakening, the soft CPI offers little relief
The Japanese yen pair rose 0.1% to a more than three-week high on Friday, continuing its recovery from lows reached in the immediate aftermath of government intervention earlier in May.
The yen received little relief from data showing inflation eased in April as expected as spending remained weak. The reading raised more questions about how much room the Bank of Japan has to tighten policy further, creating more headwinds for the yen.
Chinese Yuan losses limited by stronger PBOC fix
The Chinese yuan pair rose 0.05% on Friday, with further yuan weakness limited by a significantly stronger midpoint fix from the People’s Bank of China.
The stronger resolution came as a simmering trade war with the US, doubts over more stimulus and increased tensions with Taiwan caused a wave of selling pressure on the yuan.
The USDCNY pair was close to a six-month high.
The broader Asian currencies retreated. The South Korean won pair rose 0.3%%, while the Singapore dollar pair rose 0.1%.
The Australian dollar pair fell 0.2%. Most regional currencies headed for steep weekly losses as the prospect of long-term US yields added pressure.
