Asia FX weakens as exchange rate jitters boost dollar; Yen steady on intervention talk By Investing.com
Investing.com– Most Asian currencies were lower on Wednesday as growing bets on a slower pace of U.S. interest rate cuts supported the dollar, while the Japanese yen steadied as government officials warned of potential intervention.
Regional markets also grappled with worsening trade relations between the US and China, after Washington added two major Chinese companies to a blacklist of companies linked to the Chinese military.
The move comes just before President-elect Donald Trump’s inauguration on January 20, and Trump has vowed to impose harsh trade tariffs on China. The Chinese yuan has stabilized after hitting a 17-year low earlier this week.
Among other Asian units, South Korea’s won rose 0.1% amid continued political uncertainty in the country.
The Singapore dollar rose 0.1%, while the Indian rupee settled at 85.8 rupees after hitting a record high above 86 rupees last week.
Dollar upbeat on strong labor force, PMI data
The and were flat in Asian trade on Wednesday, after a sharp rise in overnight trade.
The dollar was boosted mainly by stronger-than-expected data for November, which showed the labor market remained strong. The data came just days before key data for December, which should offer clearer indicators on the labor market this week.
The strong data also fueled bets that inflation will remain sticky in the coming months, giving the Federal Reserve more incentive to cut rates at a gradual pace.
The central bank has warned that it will significantly slow its pace of rate cuts in 2025 amid concerns about sticky inflation and strength in the labor market.
Higher for longer US interest rates are bad for Asian markets, given that they herald a narrower spread in regional asset rates.
Japanese yen steady amid talk of intervention
The Japanese yen pair hovered around a low of 158 on Wednesday, after recovering marginally from its weakest level in nearly six months.
The yen halted its recent losses after government officials offered a verbal warning about potential intervention in the currency market, prompting traders to become more cautious in shorting the Japanese currency.
The prospect of higher interest rates in the US and a poor outlook for the Bank of Japan weighed on the yen through December, putting the USDJPY pair near levels that last required government intervention.
Traders are looking at 160 yen as a potential intervention point.
Aussie dollar steady as markets assess mixed CPI data
The Australian dollar pair clawed back early losses to trade flat as traders digested mixed inflation data from the country.
Total inflation was higher than expected for November, while core inflation decreased slightly.
The reading offered mixed indications of when Australia’s central bank might start cutting interest rates, with core inflation still above its target range of 2% to 3%.
Analysts don’t expect the RBA to start cutting rates until the second quarter, although Wednesday’s data fueled some bets on an earlier cut.
