Despite the sombre trading environment due to holiday seasons, Asian currencies, like the Japanese Yen and Korean Won, experienced a slight surge while the Rupee fell to an all-time low. The rise of the U.S. dollar indicates the resilience of the U.S. labour market.
On Thursday, November 23 – Asian currencies maintained a stable trajectory, largely confined within a tight range, reflecting the impact of a resilient U.S. labour market that has contributed to the strengthening of the dollar. However, this positive development is juxtaposed with an air of uncertainty concerning the future path of interest rates.
The subdued trading atmosphere is attributed to market holidays in the U.S. and Japan, a trend anticipated to persist throughout the week. Despite this, the Chinese yuan emerged as a standout performer, recording a 0.2% rise to 7.1428 against the dollar. This surge followed a daily midpoint fix from the People’s Bank that surpassed expectations, adding a layer of optimism to the market.
Attention is now focused on potential stimulus measures from the Chinese government to support the troubled property sector. The upcoming release of the Chinese Purchasing Managers Index (PMI) data is awaited next week, offering crucial insights into the economic landscape following a series of lacklustre readings in October.
In a holiday-thinned trade environment, the Japanese yen experienced a modest 0.3% rise, albeit nursing losses from the previous night as the dollar recovered. The Australian dollar also saw a 0.2% uptick, driven by warnings from Reserve Bank Governor Michele Bullock regarding sticky inflation, potentially setting the stage for further interest rate hikes.
Meanwhile, the South Korean Won slightly increased, while the Indian Rupee grappled with record lows, touching 83.565 this week. India’s persistent trade deficit has significantly contributed to the Rupee hitting record lows against the dollar throughout the year.
Despite the prevailing uncertainty, the Fed is cautious, leading traders to scale back some bets on an early rate cut, possibly pushing it to March 2024. The sentiment suggests that the Federal Reserve has concluded its interest rate hikes, supporting Asian currencies that continue to trade near three-month lows.