Asian Currencies Firm, Dollar Steadies Ahead of Powell Speech
Investing.com– Most Asian currencies firmed on Thursday while the dollar steadied before more cues on interest rates, especially from an address by Federal Reserve Chair Jerome Powell later in the day.
Chinese Yuan Strengthens on Stimulus Measures
– The Chinese yuan continued to strengthen after hitting a 16-month high, as traders cheered more stimulus measures from Beijing released earlier this week.
– Optimism over China also boosted broader regional currencies.
– The move ramped up confidence in a Chinese economic recovery, buoying the yuan. But looser monetary conditions are expected to limit the yuan’s recovery.
Japanese Yen Outlier as Sentiment Sours
– The Japanese yen was an outlier, extending overnight losses as sentiment towards Japan soured before the 2024 Liberal Democratic Party presidential election on Friday, which will effectively determine the country’s next Prime Minister.
Dollar Steady, Powell Speech Awaited
– The dollar cooled in Asian trade as an overnight rebound stalled, with the greenback nursing steep losses over the past week after a bumper interest rate cut by the Fed.
– The dollar recouped some losses seen over the past week, after the Fed cut interest rates by 50 basis points and marked the beginning of an easing cycle.
– Focus this week is squarely on more cues from the Fed, with a string of policymakers set to speak in the coming days. Jerome Powell is set to speak later on Thursday.
– Inflation data- the Fed’s preferred inflation gauge- is due on Friday, and is also expected to factor into the Fed’s next move. Before that, a revised reading on second quarter GDP, as well as weekly jobless claims data are due on Thursday.
Chinese Yuan Firm as Stimulus Cheer Persists
– The Chinese yuan’s USD pair fell 0.2% on Thursday, remaining at its lowest level since May 2023.
– The yuan clocked strong gains after Beijing unveiled a string of major stimulus measures aimed at shoring up growth. The People’s Bank reduced bank reserve requirements by 50 basis points, while also lowering mortgage rates.
– Optimism over China boosted other Asian currencies, with the Australian dollar’s USD pair rising 0.3%.
– The South Korean won’s USD pair fell 0.3%, while the Singapore dollar’s USD pair fell 0.2%. The Indian rupee’s USD pair rose slightly after rising on Wednesday.
Japanese Yen Strengthens Amid Uncertainty
– The Japanese yen’s USD pair rose 0.1%, moving further away from its 2024 lows as sentiment towards Japan turned uncertain before the LDP elections on Friday, which are set to determine the country’s next Prime Minister.
– Analysts expect a leadership change in Japan to stymie the Bank of Japan’s plans to raise interest rates in the near-term.
In conclusion, the current market trends indicate a dynamic and evolving landscape, with a focus on monetary policy decisions and political developments in key Asian economies. Investors should keep a close eye on upcoming events, such as Jerome Powell’s speech and economic data releases, to gain insights into the future direction of currency markets and make informed investment decisions.