Asia FX Muted as Powell Comments Offer Little Cheer, Dollar Steadies
Asian Currencies and Dollar React to Powell’s Comments
Most Asian currencies remained within a tight range on Friday, while the dollar steadied following mixed comments from Federal Reserve Chair Jerome Powell regarding interest rates. The recent spike in bond yields was seen as tightening financial conditions, reducing the need for further rate hikes. However, Powell did not rule out the possibility of at least one more rate hike this year due to the resilience of the U.S. economy and steady inflation levels. As a result, the dollar experienced some losses after Powell’s speech but has since stabilized in Asian trade on Friday. Despite this, the greenback is set to close the week 0.4% lower as traders secure profits.
Concerns Over Israel-Hamas War and Potential Middle East Conflict
Persistent concerns over the Israel-Hamas war have made traders cautious about risky assets, particularly due to growing fears of a larger conflict in the Middle East. This wariness has limited relief in regional currencies despite the dollar’s retreat. Most currencies have been trading within a flat-to-low range and are expected to end the week unchanged.
U.S. Treasury Yields and Commodity Prices
U.S. Treasury yields experienced extended losses on Friday as the recent rally paused. However, the 10-year Treasury yield remained close to the 5% level. The also saw slight declines, offsetting the overnight gains due to higher oil prices. Meanwhile, the rose 0.2% but is down for the second consecutive week. The fell 0.1%, tracking recent declines in commodity prices. However, the dollar is set to add 0.5% this week as it recovers from a near one-year low reached earlier in October.
Chinese Yuan Flat as PBOC Holds Rates
The Chinese yuan fell slightly on Friday as the People’s Bank of China kept its benchmark rate at record lows. Although data earlier in the week showed some improvement in Chinese , it was insufficient to boost the yuan, which remains close to a near 16-year low reached earlier in October. The yuan has been weighed down by fears of a major default in China’s property market and a growing trade dispute with the U.S. Attention is focused on embattled developer Country Garden Holdings (HK:), which appeared to have missed a key repayment deadline for its offshore bonds this week.
