HomeForexAsian currencies recover as dollar stabilizes; yen processes Q4 recession, avoiding further...

Asian currencies recover as dollar stabilizes; yen processes Q4 recession, avoiding further losses.

Asian Currencies Stabilize as Dollar Consolidates and Yen Reacts to Q4 Recession

Most Asian currencies stable on Thursday

On Thursday, most Asian currencies experienced minimal movement as the dollar consolidated, bringing some relief. The Japanese yen strengthened, prompted by expectations of government intervention despite data indicating an economic recession.

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Regional currencies affected by U.S. inflation

Regional currencies continued to reel from a higher-than-expected U.S. inflation reading, with traders adjusting their expectations of early interest rate cuts by the Federal Reserve.

  • A slew of Fed officials warned that sticky inflation would delay early interest rate cuts.
  • The dollar surged to three-month highs earlier this week before slightly declining in overnight trade.

Yen’s limited losses and economic downturn

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The yen rose 0.2% on Thursday, hovering around its weakest level since November and breaking past the 150 level to the dollar earlier this week.

Further yen losses were restrained by Japanese officials closely monitoring the currency and its potential impact on the market, signaling possible intervention. Japan’s economy unexpectedly contracted in the fourth quarter, entering a technical recession with weakened private spending.

Impact on Bank of Japan’s plans

The economic weakness raises doubts about the Bank of Japan’s plans to raise interest rates in 2024. Analysts at ING anticipate a delay in the BOJ’s plans, projecting a hike by June.

Despite Thursday’s strength, the yen remained the worst-performing Asian currency this week, affected by concerns over higher U.S. rates.

Broader Asian currencies and Australian dollar

Other Asian currencies moved within a flat-to-low range, nursing steep losses due to U.S. rate concerns dampening sentiment towards the region. The Australian dollar fell 0.1% and hovered near three-month lows as data showed a cooling trend in January, reducing the Reserve Bank’s impetus to hike interest rates.

Market movements

The New Zealand dollar and the Singapore dollar remained flat, while the Indonesian rupiah fell 0.4%. The Chinese yuan fell 0.1% in offshore trade as mainland markets remained closed for the week-long Lunar New Year holiday. The Indonesian rupiah fell 0.4%, despite a stock market rally after Defence Minister Prabowo Subianto appeared poised to win the country’s presidency.

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