Asian currencies remained stable on Friday, while the US dollar recovered from its lowest level in 3 and a half months amid expectations of more signals on interest rates from Federal Reserve Chairman Jerome Powell’s speech.
Currencies in the region cooled slightly after an impressive rally in November, with growing confidence that the Fed has completed its interest rate hikes.
The central bank is now widely predicted to begin cutting interest rates in 2024, as markets seek further signals on the timing of rate cuts.
Mixed economic data from Asia also provided average signals for the market. China’s yuan remained unchanged after private surveys showed unexpected manufacturing activity recovery in November, contrasting with official data released on Thursday indicating continued contraction in the manufacturing sector.
The Australian dollar edged higher as data showed manufacturing activity declined as expected in November. The market is now focused on the Reserve Bank of Australia’s meeting next week, where the central bank is widely expected to maintain interest rates amid easing inflation.
South Korea’s won changed little after inconsistent trade and production data, while the Indian Rupee remained near record lows, even as data showed the Indian economy grew faster than expected in September.
A meeting of the Reserve Bank of India is also scheduled for next week, with the bank likely to decide to keep interest rates stable.
The US dollar stabilized after rebounding from its lowest level in 3 and a half months, with Powell anticipated.
Uncertainty about the Fed’s pivot has helped the dollar recover strongly from its lowest level since mid-August.
Overnight data also showed that the PCE price index – the Fed’s preferred inflation measure – remained above the central bank’s 2% target in October.
DXY and DX1! edged lower in Asian trading after rising 0.7% on Thursday.
Powell is expected to speak at two separate events on Friday, and any changes in the Fed Chairman’s views will attract attention, as some other Fed officials believe the central bank has completed interest rate hikes.
Powell largely maintains the view that interest rates will remain high for longer, although that trend will also depend on inflation trends. Some Fed members noted this week that inflation has decreased significantly this year, although it still remains above the central bank’s target range.
The US dollar has also faced a sharp decline in November amid growing confidence that the Fed has completed its interest rate hikes. Asian currencies have risen during the month with a similar outlook.
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