Feb 16 2024: Most Asian currencies showed limited movement on Friday, with the market sentiment indicating a muted weekly performance as expectations of early interest rate cuts by the Federal Reserve waned.
Despite the dollar retreating from a three-month peak after disappointing retail sales data for January, regional currencies found little solace. The dollar rebounded partially following comments from Federal Reserve Bank of Atlanta President Raphael Bostic, hinting at a delay in rate cuts and uncertainty regarding inflation reaching the central bank’s target.
Both the dollar index and dollar index futures edged up by 0.1% in Asian trading, marking their fifth consecutive week of gains with a 0.3% increase. Bostic’s remarks followed recent consumer price index data showing an unexpected rise in inflation in January, providing additional insight into the Fed’s rate trajectory.
Investors are now eyeing the release of producer price index inflation data and an address by San Francisco Fed President Mary Daly for further guidance on U.S. interest rates.
The prospect of delayed rate cuts by the Fed weighed on most Asian currencies, leaving them poised for minimal weekly movements.
Yen struggles near 150 as BOJ’s dovish stance weighs, intervention fears linger
The Japanese yen faced significant pressure this week, declining by 0.6% and hovering near a three-month low. The currency was adversely affected by growing expectations of the Bank of Japan postponing its planned interest rate hikes, especially following Japan’s unexpected entry into a technical recession in the fourth quarter.
Trading around 150 to the dollar, the yen faced potential downside risks amid speculation of government intervention in currency markets, a measure historically taken when the currency weakens beyond the 150 threshold.
Elsewhere, the Australian dollar and Singapore dollar both declined by 0.2% and 0.1%, respectively, despite positive data showing a stronger-than-expected rebound in Singapore’s key non-oil exports for January.
The South Korean won fell by 0.4%, while the Indian rupee remained steady around the 83 level.
The diminishing expectations of early rate cuts by the Fed had previously dampened sentiment across Asian markets at the start of the year, with regional currencies experiencing limited relief amid the backdrop of prolonged higher U.S. interest rates.
