Asian markets saw a decline in their currencies on Thursday as the US dollar saw a rise to two-week peaks. This increase came amidst caution as investors awaited key cues on US inflation and interest rates in the coming days. The Federal Reserve’s recent hawkish signals have left regional currencies reeling, as officials emphasize the need for more confidence in easing inflation. Some even suggest the possibility of further rate hikes if inflation remains stubbornly high.
Traders have shown a strong bias towards the greenback, with the dollar index and dollar index futures rising in Asian trade. The market sentiment points towards the belief that the Fed will likely not cut interest rates anytime soon. The upcoming revised reading on first-quarter GDP is expected to show ongoing resilience in the US economy, giving the Fed more room to maintain higher interest rates.
The USDJPY pair saw a slight decline on Thursday but remained near recent highs due to continuous weakness in the yen. The potential for further government intervention has prevented the yen from weakening further, as the Japanese government’s actions in the currency market earlier in May halted the USDJPY pair from reaching 160.
Investors are keeping a close eye on an upcoming inflation report from Tokyo on Friday for insights into the Japanese economy. Any signs of increasing inflation could provide some relief to the yen. Further across Asia, the Chinese yuan saw a slight weakening as concerns over the sluggish economy persisted. The upcoming release of purchasing managers index data from China on Friday will be closely watched.
The Australian dollar traded sideways following a stronger-than-expected inflation reading, while the Singapore dollar and South Korean won both saw gains against the US dollar. The Indian rupee, however, saw a slight increase and remained close to recent record highs.
The Asian markets are facing uncertainty and volatility as concerns over inflation, interest rates, and government interventions continue to shape currency movements. Investors are advised to stay informed and cautious in the face of these shifting dynamics.