Asia FX flat in anticipation of the Fed meeting
2023.01.31 01:25
Asia FX flat in anticipation of the Fed meeting
By Kristina Sobol
Budrigannews.com – On Tuesday, the majority of Asian currencies did not change much, but the dollar maintained its recent gains as caution kicked in ahead of a Federal Reserve meeting this week, where any signals on U.S. monetary policy will be closely watched.
However, expectations that the Fed would act in the coming months positioned the majority of Asian units for substantial gains in January. Through January, Southeast Asian currencies with a lot of risk were the best performers, with gains of more than 5% leading its peers.
The data showed that after the country relaxed most anti-COVID measures in January, they received little support. The yuan lost 0.1% against the dollar, but it remained close to its seven-month high and was expected to gain over 2% in January.
The positive data from China continue to suggest that the largest economy in Asia is on the way to recovery, which could be good news for the region this year.
After data showed that rose more than expected in December, while local factories also cut output slightly, the was one of the better performers for the day, rising 0.2%. The yen is on track for a 0.7% increase in January due to expectations of more hawkish actions from the Bank of Japan.
In anticipation of the Fed meeting, the dollar held steady against a basket of currencies while the broad Asian currencies moved little. Investors are concerned about a more hawkish outlook than anticipated despite the fact that the Fed is expected to raise interest rates by 25 basis points on Wednesday. This is especially concerning given that recent economic data demonstrated that the Fed has sufficient leeway to continue raising rates.
Despite retreating over the past few months, is also trending well above the Fed’s target range.
After a sharp recovery from a January low that was almost eight months old, and held above 102. However, the dollar was still expected to lose more than 1% in January.
After data revealed that the country’s declined significantly more than anticipated in December, the was the day’s worst performer, falling 0.4%. The reading highlights the increasing pressure that high interest rates and rising inflation are placing on the economy of Australia, which may necessitate a slower rate hike pace.
