Investing.com — Most Asian currencies were muted on Friday as the U.S. dollar held near a 13-month high while the Japanese yen held steady after consumer inflation came in slightly above expectations.
Regional currencies have lost ground in recent weeks, pressured by the dollar’s strength, as caution over a slower pace of Federal Reserve rate cuts weighed on sentiment. Traders were also tense about what new US President Donald Trump’s policies will mean for Asian countries, especially China.
The Chinese yuan pair rose 0.1% and was near a four-month high. The yuan has depreciated as much as 1.8% against the dollar so far in November as lackluster signals on Chinese stimulus also weighed on local markets.
The South Korean won-Singapore dollar pair was largely flat. Both currencies have lost almost 2% against the dollar so far this month.
The Australian dollar pair was also flat, while the Indian rupee pair hovered below record highs at around 84.5 rupees.
Dollar steady at one-year peak
The price rose slightly to 107.06 after hitting a one-year high of 107.15 on Thursday. also remained stable around a thirteen-month peak in Asian trade.
Recent data points — particularly last week’s sticky inflation data and Thursday’s better-than-expected weekly jobless claims — caused traders to lower their expectations for a Fed rate cut in December.
Speculation about Trump’s policies, which could reignite inflation and limit the Fed’s ability to cut rates over the long term, has also supported the dollar.
Traders were cautious about the outlook for the Fed’s rate path, estimating a 61.3% chance of a 25 basis point cut at the December meeting, up from 72.2% a week ago.
Fed Chairman Jerome Powell recently stated that the central bank is in no rush to cut rates, citing the resilience of the economy.
Overnight, labor data showed the weekly initial unemployment rate unexpectedly fell to the lowest level in seven months, but also showed that laid-off workers are taking longer to find new jobs, indicating that the unemployment rate could rise this month to rise.
The (PCE) index, the Fed’s preferred inflation measure, will be released next Friday and is expected to provide more clues about interest rates.
Japanese Yen Stable After Stronger-than-Expected CPI
The Japanese yen pair was 0.1% lower after falling 0.6% in the previous session. But the currency also suffered steep losses against the dollar in October and November.
Japanese inflation grew slightly more than expected in October, while the core measure came in above the central bank’s annual target, keeping expectations alive for another rate hike by the Bank of Japan (BOJ). A Reuters poll showed on Friday that analysts expect the BOJ to raise rates in December.
Persistent inflation is expected to prompt more rate hikes from the BOJ after the central bank raised rates twice so far in 2024.
BOJ Governor Kazuo Ueda said Thursday that the bank will scrutinize the data ahead of its rate review next month, and “seriously” consider the impact that movements in the yen could have on the economic and price outlook.
Other data showed Japanese business activity contracted for the fifth straight month in November as demand from private sector companies remained stagnant over the period.
