Asian exchange rate weakens as dollar rises to 26-month high on growing exchange rate jitters By Investing.com
Investing.com– Most Asian currencies fell on Monday, on lingering pressure from a stronger dollar as stronger-than-expected U.S. payrolls data fueled heightened expectations that interest rates will fall more slowly in 2025.
Regional trading volume was somewhat muted due to the Japanese market holiday, although the yen also remained fairly fragile along with its regional peers.
Positive data on Chinese trade did little to lift sentiment in the region, and the yuan remained fragile despite efforts by the National Bank to support the currency.
Dollar at 24-month high on strong payrolls data
The and rose in Asian trade after hitting their strongest levels since November 2022 on Friday.
The dollar was boosted mainly by stronger-than-expected December data, which showed the US labor market remained strong.
The reading comes amid heightened concerns that a strong labor market and sticky inflation will give the Federal Reserve more incentive to slowly cut interest rates this year.
To that end, CPI inflation data is due out this Wednesday and will be closely watched for additional interest rate indicators.
A number of Fed officials will also speak this week, after minutes from the Fed’s December meeting showed growing concerns among policymakers about high inflation and the strength of the labor market.
Analysts at Goldman Sachs said they now expect just two rate cuts in 2025, compared with a previous expectation of three cuts. The Fed’s terminal rate is also expected to be higher than initially expected.
Chinese yuan weak despite positive trade data, PBOC support
The Chinese yuan weakened on Monday, with the pair up 0.3%.
The yuan’s weakness came even as data showed China’s exchange rate rose more than expected in December, helped by an excessive .
But the reading was largely linked to exporters loading their shipments before US President-elect Donald Trump imposed harsh trade tariffs on the country.
Trump – who will take office on January 20 – has promised to impose tariffs on China from “day one” of his presidency.
Recent measures by the PBOC have done little to help the yuan. The central bank has paused its bond-buying programs for liquidity and has also put in place a series of strong central fixes.
The focus is now on additional stimulus measures from Beijing, particularly in response to Trump’s tariffs.
Broader Asian currencies ranged flat to lower, remaining under pressure from higher prospects for longer US interest rates.
The Japanese yen pair fell 0.1%, still weighed down by uncertainty surrounding the Bank of Japan’s meeting later this month.
The Australian dollar rose 0.1% after falling to a near five-year low last week. The South Korean won fell slightly, while the Singapore dollar gained 0.1%.
The Indian rupee pair stabilized after hitting a new record high above 86 rupees.
