Investing.com — Most Asian currencies rose on Thursday, gaining some breathing room as the dollar retreated from a more than five-month high, although fears of longer US yields remained at the forefront.
Regional currencies have posted steep losses in recent sessions as strong U.S. economic data and aggressive signals from the Federal Reserve led to a rally in the dollar and government bond yields.
But the dollar saw some profit-taking on Wednesday as sentiment improved marginally amid a lack of immediate escalation in tensions between Iran and Israel.
Dollar falls from 5-½ month high
The and both fell slightly in Asian trading, extending overnight declines as markets held on to some recent gains in the dollar.
Both indicators remained close to the levels last observed in early November.
The short-term outlook for the dollar still remained optimistic, especially as investors almost completely scaled back their bets that the Federal Reserve would cut rates in June.
This thinking was fueled by strong US inflation data, with Fed Chairman Jerome Powell also flagging the possibility of higher interest rates in a speech earlier this week.
The prospect of high US interest rates does not bode well for Asian markets as it narrows the gap between high-risk and low-risk returns.
U.S. Treasury yields also shot up in recent sessions, nearing a five-month high.
Interest rate fears keep Asian currencies subdued
Broader Asian currencies rose slightly after some relief from the dollar’s dip. But gains remained limited as fears about US interest rates persisted.
The Japanese yen strengthened in recent sessions, with the pair moving back to 153 after testing 34-year highs above 154. The yen’s weakness also left markets cautious about government intervention.
The Japanese, expected on Friday, are expected to provide more signals about the yen.
The Australian dollar pair rose 0.3%, further recovering from this week’s five-month low. While the March data showed some improvement, the sector still remained relatively tight.
The Chinese yuan pair moved little after rising to a five-month high in recent weeks. Uncertainty about the Chinese economy left traders biased against the yuan, while the People’s Bank took action to stem further losses in the currency.
The South Korean won pair fell 0.4%, while the Singapore dollar pair lost 0.1%.
The Indian rupee pair remained close to record highs above 83.5.
