Investing.com — Most Asian currencies moved little on Monday, while the dollar stabilized after falling from its highest level in more than two years after dovish U.S. inflation data raised some hopes that interest rates will still fall in 2025.
Asian currencies posted steep losses against the dollar last week, although they pared some declines on Friday after soft inflation data. The outlook for regional markets also remains clouded by uncertainty over US interest rates and policies under incoming President Donald Trump.
The dollar falls from a two-year high as PCE data misses expectations
The and both remained stable on Monday after posting sharp losses on Friday.
The dollar fell from a more than two-year high after data – the Federal Reserve’s favorite inflation gauge – appeared softer than expected on Friday.
Still, interest rates remained above the Fed’s annual target of 2%, keeping interest rate uncertainty in play.
The Fed had cut rates by 25 basis points last week but signaled a slower pace of rate cuts for the coming year, citing concerns about persistent inflation and labor market resilience.
The Fed is expected to cut rates twice in 2025, although the path of rates remains uncertain.
Markets got some relief as the government avoided a shutdown after lawmakers passed an eleventh-hour spending bill.
Asian currency under pressure due to interest rate uncertainty
Despite posting some gains on Friday, most Asian currencies were still trading lower in December as the outlook for interest rates remained uncertain.
The Japanese yen pair rose 0.1% to around 156.59 yen, after rising to 158 yen last week following dovish signals from the Bank of Japan.
The BOJ indicated that it is not considering rate hikes in the near term, despite a recent rise in inflation, and that it could not raise rates until March 2025.
The Chinese yuan pair rose 0.1% to hit a one-year high as traders continued to worry about China’s economic prospects. While Beijing is expected to increase fiscal spending in the coming year to support the economy, looser monetary conditions are expected to undermine the yuan.
The Singapore dollar pair was flat ahead of inflation data due later in the day, while South Korea’s won pair rose 0.3%.
The Australian dollar pair rose slightly after falling to a two-year low last week.
The Indian rupee pair remained steady after hitting a record high above 85 rupees last week.
