Investing.com — Most Asian currencies moved little on Friday, posting losses throughout the week, while the dollar held steady at a one-year high and was poised for a strong week as markets scaled back bets on lower U.S. interest rates.
The dollar was on track for a sixth straight week of gains as the rally following Donald Trump’s election victory last week continued. Less dovish statements from the Federal Reserve and strong US inflation data contributed to the dollar’s strength.
This trend weighed heavily on most Asian units, with mediocre economic data from China and Japan adding to negative sentiment on Friday.
Dollar strong as inflation rate cuts ease, Powell notes
The and both rose 0.1% on Friday and were close to a one-year peak earlier this week.
The dollar rose between 1.6% and 2% this week, the best week since late September.
The dollar’s rise was initially driven by Trump’s election victory, with expansionary policies under his administration expected to boost inflation in the long term.
In the short term, persistent inflation data raised doubts about future Federal Reserve rate cuts, especially as Chairman Jerome Powell said the resilience of the U.S. economy gave the central bank more time to consider cutting rates.
His comments caused traders to sharply lower expectations for a 25 basis point cut in December.
Japanese Yen Vulnerable, USDJPY Crosses 156 After Weak GDP
The Japanese yen weakened further on Friday, with the pair trading above 156 yen and at its highest level in more than three months.
Data for the third quarter shows that Japanese economic growth has slowed sharply from the previous quarter. While growth remained strong, weakness in other sectors of the economy, especially in exports and investment, weighed on growth.
Inflation also grew less than expected in the third quarter, indicating that inflation growth declined over the quarter.
Friday’s data fueled hopes that economic weakness will prevent the Bank of Japan from raising rates further – a scenario that does not bode well for the yen.
The broader Asian currencies were vulnerable and headed for weekly losses. The Chinese yuan pair rose 0.1%, poised for a seventh straight week of gains.
Chinese missed expectations, growing more than expected during Golden Week in October. But overall economic conditions in the country still remained weak, with recent stimulus measures largely disappointing markets.
The focus now is on a possible cut by the People’s Bank next week.
Concerns over China weakened the Australian dollar, with the pair hovering near a three-month low.
The Singapore dollar pair fell 0.1%, while the South Korean won pair fell 0.2%. Both currencies are heading for losses this week.
The Indian rupee pair remained steady after hitting a record high this week.
