Asia FX Treads Water, Dollar Edges Lower Before CPI Test
Asian Currencies Stagnate Amid Market Holiday
Most Asian currencies remained stagnant on Monday as market holidays across the region limited trading volumes. The dollar also experienced a slight decline ahead of key inflation data expected later this week.
Limited Moves Due to Regional Market Closures
Chinese, Singaporean, South Korean, and Hong Kong markets were closed for the Lunar New Year holiday, while Japanese markets were closed for a memorial day. As a result, most regional currencies experienced limited movement.
Anticipation of U.S. Inflation Reading
Traders remained cautious with the anticipation of the U.S. inflation reading, leading to limited moves in the market. The dollar fell 0.1% in offshore trade, while the and also experienced 0.1% declines.
Focus on U.S. Inflation Data
The dollar remained flat ahead of the key Consumer Price Index (CPI) inflation data set to be released on Tuesday. This reading is expected to show inflation remaining sticky, following the Reserve Bank of India’s recent announcement of a hawkish approach to keep inflation in check.
Dollar Creeps Lower with CPI, Fed Comments on Tap
The and both experienced 0.1% declines in Asian trade as traders awaited cues on U.S. interest rates. The CPI report, expected to show some easing in inflation, is likely to keep price pressures relatively high, giving the Federal Reserve more reason to maintain higher rates for a longer period.
Japanese Yen Hovers at 2-½ Month Low on Dovish BOJ
The moved little on Monday following steep losses from the past week after Bank of Japan Deputy Governor Shinichi Uchida hinted at a gradual scaling back of the bank’s ultra-dovish stance. This led traders to price out any rapid interest rate hikes by the BOJ, negatively impacting the yen.
While Uchida’s comments did suggest an eventual end to the BOJ’s low interest rate regime, they also indicated that the bank’s approach will be gradual, contributing to the yen’s weakened position. The yen traded close to its weakest level since late-November, at 149.23 to the dollar, making it the worst-performing Asian currency so far in 2024.