Jan 9, 2024: Most Asian currencies remained within narrow ranges on Tuesday but experienced some reprieve as the dollar encountered profit-taking before pivotal inflation data, expected to provide insights into potential interest rate cuts this year.
At the onset of the year, regional currencies faced uncertainties regarding the Federal Reserve’s inclination toward early interest rate cuts. The market sentiment was influenced by robust data portraying resilience in the U.S. labor market, reducing the urgency for the Fed to initiate policy loosening promptly.
While there was a minor respite for Asian currencies this week, they predominantly traded lower for 2024 following a moderate performance in 2023.
The Japanese yen recorded a 0.4% increase as Tokyo’s inflation data for December inched closer to the Bank of Japan’s 2% annual target range. The BOJ indicated a cautious approach, planning policy adjustments only after achieving the 2% target.
However, the yen observed significant declines in the first week of 2024, reflecting investor beliefs that reconstruction efforts after a severe earthquake in central Japan might delay the BOJ’s intended policy shift.
The Australian dollar saw a slight uptick following data displaying a more substantial-than-anticipated surge in November retail sales. This robust reading might foreshadow strength in the consumer price index (CPI) inflation data scheduled for release on Wednesday.