Investing.com — Most Asian currencies held steady after recent losses on Thursday, while the dollar hovered around a four-month high following a presidential election victory for Donald Trump.
The focus has now been on the conclusion of a Federal Reserve meeting later in the day, where the central bank is widely expected to cut interest rates. But the prospects for future rate cuts will be closely watched.
Asian currencies posted steep losses in the previous session after news of Trump’s victory led to sharp gains in the dollar and government bond yields. But they settled down on Thursday after these losses, with speculation about government intervention in Japan and China also helping their respective currencies.
Chinese Yuan Companies Amid Intervention Watch; NPC meeting in focus
The Chinese yuan firmed slightly on Thursday, with the pair falling 0.1% after earlier racing to a three-month high. The People’s Bank also posted a substantially weaker yuan midpoint for the day.
The yuan has been battered by the prospect of a Trump presidency as he has promised to impose steep trade tariffs against the country.
The prospect of a renewed trade war does not bode well for the Chinese economy, with reports suggesting Chinese state-owned banks were selling dollars to help counter further yuan weakness.
But Beijing is also expected to roll out more fiscal stimulus to guard against possible tariffs. The National People’s Congress started a four-day meeting earlier this week and is expected to outline plans to increase budget spending and support growth.
According to local media reports, Prime Minister Xi Jinping had congratulated Trump on his victory and called for better cooperation between China and the US.
In addition, the data showed that the Chinese economy grew much stronger than expected in October, supported by a robust .
The dollar remains at a four-month high after Trump’s victory
The and both fell slightly in Asian trading, remaining just below their highest levels in four months.
The dollar rose on Wednesday after Trump’s victory. The newly elected president is expected to pursue more inflationary policies given his protectionist stances on trade and immigration.
Such a scenario is likely to keep interest rates stable over the longer term, which will benefit the dollar.
The focus is also on the conclusion of a Fed meeting on Thursday, which the central bank is expected to do.
But much of the focus will be on the Fed’s interest rate outlook, especially in light of the Trump presidency, and the recent persistence of inflation.
Broader Asian currencies were largely muted on Thursday, with traders remaining cautious on the Fed. Regional units also posted steep losses in the previous session after the dollar recovered.
The Japanese yen pair fell 0.2% after hitting a three-month high in the previous session. The sharp (OTC:) weakness of the yen led to warnings from Japanese ministers about possible intervention.
The Australian dollar pair rose 0.8%, recovering from losses in the previous session. Data showed the country’s economy shrank more than expected in September, due to declining commodity exports.
The South Korean won pair fell 0.2%, while the Indian rupee pair hovered above 84 rupees after rising to a record high in the previous session.
