Asian Currencies Weaken as Dollar Strengthens on Hawkish Fed Signals

Asian Currencies Fall as Dollar Gains Traction

Most Asian currencies experienced a decline on Friday, while the dollar stabilized following recent losses. This came as hawkish signals from the Federal Reserve and robust U.S. labor data raised doubts about the possibility of early rate cuts in the U.S.

Both the and the saw minimal movement in Asian trade and were poised for modest weekly declines after slipping from their three-month highs earlier in the week.

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Strong Dollar Outlook Amid Fed’s Hawkish Comments

The outlook for the greenback remained positive amidst indications that the Federal Reserve would maintain higher rates for an extended period.

Fed official stated on Thursday that he required more evidence of cooling inflation before considering interest rate cuts. This sentiment echoes similar comments from other Fed officials, reinforcing the message that the central bank is in no rush to adjust monetary policy.

Hawkish Fed Comments and Labor Data Dampen Rate Cut Expectations

Wallers’ comments were swiftly followed by data indicating a surprise drop in U.S. jobless claims, signaling sustained strength in the labor market. This further diminishes the likelihood of early rate cuts by the Fed.

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Anticipation of prolonged higher U.S. rates has negative implications for Asian markets, leading to a narrowing gap between risky and low-risk yields and consequently keeping most regional currencies under pressure.

Yen Remains Above 150 Level Amid Intervention Concerns

Despite a market holiday in Japan, the yen continued to trade above the 150 level against the dollar. This has raised concerns about potential intervention measures by the Japanese government to address the currency’s weakness.

The yen’s outlook has also been clouded by worries about a slowing Japanese economy, particularly after unexpectedly entering a recession in the fourth quarter.

Asian Units Face Mixed Performance

While the experienced a slight decline amid speculation about additional stimulus measures from Beijing, the shed 0.2%, and the remained unchanged ahead of key inflation readings expected later in the day.

Meanwhile, the was among the few gainers, rising 0.2% as it continued its rebound from three-month lows. The was flat but showed signs of moving further away from the 83 level, buoyed by positive sentiment following strong service sector data released on Thursday.