Following a blowout nonfarm payrolls report, fears of high interest rates for a longer period resulted in most Asian currencies retreating. The strength of the dollar was further supported by a decrease in the euro, which reached a one-month low due to political uncertainty following the European Union elections showing a shift towards right-wing parties.
Regional trading volumes were limited due to market holidays in key players such as China, Hong Kong, and Australia. This absence contributed to the overall impact of the dollar rebound on Asian currencies.
The anticipation of a Federal Reserve meeting, with expectations of no rate cuts, led to the dollar index and dollar index futures advancing in Asian trade, building on the strong gains from the previous week. Any signals from the meeting regarding future rate decisions will be closely monitored by traders.
Despite slight improvements in Japan’s GDP data, the Japanese yen weakened against the dollar, with the USDJPY pair rising above the 157 level. The upcoming Bank of Japan meeting is expected to address policy tightening, but uncertainties remain due to the continuous weakness in the economy.
Other Asian currencies also experienced weakness in light of the dollar rebound. The South Korean won remained flat against the US dollar, while the Singapore dollar saw a 0.2% increase in the USDSGD pair. The Indian rupee, although fluctuating around the mid-83 level, was still close to a record high following a significant drop in the previous week.
The overall impact of the dollar rebound on Asian currencies highlights the interconnectedness of global markets and the influence of key economic indicators on currency valuations. As investors continue to monitor central bank meetings and economic data releases, the volatility in currency markets is likely to persist. It is essential for traders and policymakers to remain vigilant and adapt to the evolving market conditions to make informed decisions.