Investing.com — Most Asian currencies pared losses Thursday, while the dollar held near one-year highs amid growing doubts over whether the Federal Reserve will cut interest rates in December.
Speculation about expansionary policies under Donald Trump’s presidency has been a major boost for the dollar in recent weeks, as have persistent inflation data for October, along with less dovish signals from the Fed.
Sentiment in Asia was also dampened by uncertainty over more Chinese stimulus, while broader risk appetite declined due to increased tensions between Russia and Ukraine.
Dollar near 1-year high as traders lower bets on December rate cut
Trading in Asia was steady after a strong overnight session.
The dollar was supported by increased caution about future Fed rate cuts. Traders were pricing in a 53.3% chance of a 25 basis point cut in December, much lower than the 85.7% chance shown a day ago.
Traders also increased bets the Fed will hold to 46.7% from 14.3% last week.
The shift in expectations came after Fed Chairman Jerome Powell said last week that the resilience of the U.S. economy gave the central bank more time to consider future rate cuts. His comments were also preceded by data pointing to persistent inflation in October.
Trump’s election victory had also supported the dollar since early November, with the newly elected president expected to pursue more inflationary policies given his protectionist stance on trade and immigration.
US figures are due this week and will provide more clues about the world’s largest economy. The numbers will also be released later on Thursday, with several Fed officials scheduled to speak in the coming days.
Asia FX weak due to interest rate fluctuations
Asian currencies were pressured by the prospect of relatively higher US interest rates and potential trading market headwinds from a Trump presidency.
The Chinese yuan has been hit hardest by these concerns as Trump has promised to impose steep import tariffs on the country. The yuan pair moved little on Thursday and was close to a four-month high.
Disappointing signals about Chinese stimulus measures also put pressure on the yuan.
The Japanese yen firmed slightly on Thursday, but also suffered steep losses against the dollar in October and November. The pair fell 0.3% after breaching the 155 yen level this week.
The Australian dollar pair rose 0.2% after hitting a near four-month low last week. The South Korean won pair remained flat, as did that of the Singapore dollar.
The Indian rupee pair rose 0.1% and was close to the record high of around 84.6 rupees reached earlier in November.
PMI figures from several major Asian economies, including Japan, China, Australia and India, will be released in the coming days, providing more clues about business activity in the region.
Japanese is also on tap this Friday.
