Oct 25 2024: Asian currencies traded mostly lower on Friday, with the U.S. dollar maintaining a strong weekly performance driven by expectations for a slower pace of Federal Reserve rate cuts.
The Japanese yen remained near its three-month low ahead of Japan’s general election this weekend, with caution around potential currency market intervention keeping traders wary. The yen led declines among Asian currencies this week, traditionally acting as a safe-haven but under pressure amid election uncertainties.
Yen Stays Near 152 as Election and Intervention Concerns Loom
The USD/JPY pair held steady near a three-month peak of 152 yen, with the yen facing a 1.6% loss this week, marking its fourth consecutive weekly decline.
Investor sentiment was cautious ahead of Sunday’s general election, with polls suggesting that the ruling Liberal Democratic Party-led coalition could struggle to secure a majority. This political uncertainty could challenge Prime Minister Shigeru Ishiba’s economic reform agenda, potentially lowering expectations for further interest rate hikes from the Bank of Japan.
Tokyo’s latest inflation data showed a slight decline but still below the BOJ’s 2% target, indicating likely similar trends in the upcoming nationwide report. Despite recent yen weakness, verbal warnings from government officials regarding potential currency intervention lent some stability to the currency.
Dollar Set for Fourth Consecutive Weekly Gain
The dollar index and dollar futures steadied in Asian markets, with the dollar poised for its fourth straight week of gains, trading up approximately 0.6% for the week.
The greenback received additional support from expectations of smaller Federal Reserve rate cuts, alongside increasing speculation that Donald Trump may win the 2024 U.S. presidential election. Trump’s policies are viewed as potentially inflationary, raising the outlook for U.S. rates in the long term and adding to dollar strength.
Concerns over persistent U.S. interest rates weighed on Asian markets, leading to broader declines across regional currencies.
The Chinese yuan’s USD/CNY pair rose 0.1% on Friday, and was up 0.3% for the week. The National People’s Congress meeting in China, originally set for late October, is now anticipated to be delayed until November.
Elsewhere, the Australian dollar’s AUD/USD pair fell 0.3% on Friday, while the South Korean won’s USD/KRW pair surged 0.7%. Singapore’s dollar USD/SGD rose 0.2%, and the Indian rupee USD/INR hovered near record lows.
