Oct 24 2024: Asian currencies steadied on Thursday after recent declines, with the Japanese yen hovering near a three-month low. The U.S. dollar maintained its strength, bolstered by expectations of slower interest rate cuts from the Federal Reserve.
Risk aversion weighed on regional currencies due to a tense U.S. presidential race and heightened Middle East concerns, which favored both the dollar and gold. However, the yen saw little safe-haven demand amid doubts over the Bank of Japan’s (BOJ) ability to continue raising interest rates.
Traders are also waiting for signals on potential stimulus measures from China, which has kept broader Asian currencies in check.
Yen Stabilizes Amid Intervention Concerns
The Japanese yen saw a slight dip against the dollar (USD/JPY) on Thursday after nearing a three-month low in the previous session. The yen gained some support following warnings from Japanese government officials about “one-sided” moves in currency markets, raising fears of potential intervention.
However, the yen showed little reaction to weak purchasing managers’ index (PMI) data, which indicated a contraction in business activity in October. The currency remained fragile as doubts grew about further BOJ rate hikes, particularly with general elections in Japan approaching on Sunday.
If the ruling Liberal Democratic Party needs to form a coalition to stay in power, Japan’s political landscape could shift, potentially limiting the BOJ’s ability to adjust monetary policy. The BOJ is expected to hold rates steady at its upcoming meeting next week, with inflation data from Tokyo due on Friday.
Strong Dollar Supported by Rising Yields and Rate Cut Bets
The U.S. dollar index and dollar futures edged slightly lower in Asian trading but remained near three-month highs. The dollar’s strength was driven by a sharp increase in U.S. Treasury yields and bets that the Federal Reserve will implement a smaller rate cut of 25 basis points in November, as the U.S. economy continues to show resilience.
Market participants are awaiting U.S. PMI data later in the day for further insights. Additionally, improving odds for Republican nominee Donald Trump in the upcoming presidential election supported the dollar, amid expectations that his policies could be inflationary.
Broader Asian Currencies Rebound Slightly
Asian currencies showed modest recovery on Thursday, recouping some of their recent losses. The Australian dollar (AUD/USD) rose 0.2% after mixed PMI data, while the South Korean won (USD/KRW) was flat after weaker-than-expected GDP data revealed sluggish third-quarter growth.
China’s yuan (USD/CNY) fell 0.2%, bouncing back slightly after hitting a near two-month low earlier in the week. The Singapore dollar (USD/SGD) dipped 0.1%, while the Indian rupee (USD/INR) edged down from near-record lows.
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