Jan 18, 2024: Most Asian currencies showed little movement on Thursday after experiencing significant losses in the previous session, while the dollar slightly declined from a one-month high as robust U.S. retail sales data raised doubts about early rate cuts by the Federal Reserve.
Market sentiment towards Asian economies remained weak following disappointing Chinese gross domestic product data, indicating the region’s largest economy is struggling with a sluggish post-COVID recovery.
The Chinese yuan stabilized after reaching its lowest level in almost two months, with limited further losses due to a stronger-than-expected midpoint fix by the People’s Bank of China. However, the outlook for the yuan remains cautious, as the PBOC contends with slow growth and limited capacity to support the currency.
Concerns over China’s economic performance weighed on most Asian currencies, given its pivotal role as a trading hub for the region. The Australian dollar, which hit an over one-month low in the previous session, rose 0.3% after unexpected labor data revealed a decline in employment for December.
The Singapore dollar, closely tied to China’s trade, edged higher after touching a two-month low, while the Taiwan dollar stabilized near a two-month low. The Japanese yen steadied at a 1-½ month low ahead of key consumer price index (CPI) data expected on Friday, signaling a sustained decline in inflation that provides little incentive for the Bank of Japan to tighten its ultra-loose policy.
The South Korean won rose 0.1% from a 2-1/2 month low, while the Indian rupee hovered near record lows. The dollar index and dollar index futures dipped by 0.1% to 0.2% in Asian trade after a strong rebound earlier in the week. Stronger-than-expected retail sales data for December contributed to doubts about an early rate cut by the Fed, with traders scaling back bets on a March rate cut. The CME Fedwatch tool indicated a 61.8% chance for a 25 basis point cut in March, down from 67.3% a week ago.