Asia FX flat in anticipation of new impulse from Fed
2023.02.24 02:16
Asia FX flat in anticipation of new impulse from Fed
By Kristina Sobol
Budrigannews.com – On Friday, the incoming head of the Bank of Japan also advocated for a somewhat dovish outlook, and markets awaited additional clues on U.S. monetary policy from an inflation reading later in the day. As a result, most Asian currencies fell.
In light of the weak economy, Kazuo Ueda, who will take over as governor of the BOJ in April, was unconvinced that the central bank will largely maintain its ultra-accommodative policy in the near future.
Even though Ueda said that the bank’s tight control of the yield curve might come to an end one day, he said that it needed to stay at record low levels to help the economy grow.
Although Ueda attributed the recent rise in inflation to supply-side issues, data on Friday showed that Japan’s inflation reached a level that was higher than 41 years earlier in January.
However, the BOJ is under greater pressure to tighten its monetary policy as rising inflation has weighed heavily on the Japanese economy in recent months. Additionally, over the course of the past week, foreign traders bet on an eventual policy tightening.
In the face of ongoing uncertainty regarding the monetary policy of the United States, the dollar remained stable while other Asian currencies declined. The traded at 6.9 against the dollar, down 0.2 percent, and led the region’s losses with a 0.3 percent decline. For the week, both currencies were the worst performers in Asia, falling 0.8% each.
Due to pressure from rising Treasury yields, most other regional units were also slated for weekly losses.
The Federal Reserve’s preferred inflation gauge, due later on Friday, is now the primary focus. It is most likely that the reading will show that inflation remained high in January.
This week, the dollar strengthened against a basket of currencies, with and expected to rise by more than 0.6 percent this week. The overnight data presented a mixed picture of the economy in the United States. Despite the lower revision, a decrease in indicated that the job market remained hot.
The was predicted to lose 0.4 percent this week, its fifth consecutive week in the red. This week, the country’s 18-month rate hike cycle was halted due to a severe economic slowdown.
The Asian currency performed the best this week, rising by over 1%, rising by 0.2 percent. However, the currency had also suffered severe losses for two weeks in a row.
