Asia FX surges, dollar hits one-year low on bets of rate pauses

By Ambar Warrick

Investing.com– Most Asian currencies rose sharply on Friday, while the dollar sank to near one-year lows as soft inflation data spurred increased bets that a pause in the Federal Reserve’s rate hike cycle was imminent.

The was among the best performers for the day, up 0.5% as a surprise rebound in spurred a stronger daily midpoint fix by the People’s Bank. PBOC Governor Yi Gang also reiterated the government’s 5% GDP target for 2023.

While Chinese economic data has painted a somewhat middling picture of an economic recovery, a sustained improvement in exports could feed a bigger rebound this year.

The added 0.2%, while the led gains across Southeast Asia with a 0.6% jump. 

The also firmed 0.1%, and was sitting on strong overnight gains as the dollar retreated.

The and fell 0.2% on Friday to their lowest levels in nearly a year, after data showed that U.S. inflation grew at a slower-than-expected rate in March.

The data was preceded by a smaller than expected rise in inflation, and helped further the notion that price pressures were easing amid high interest rates.

This also spurred bets that the Fed has limited headroom to keep hiking rates, with showing that markets are positioning for one more hike in May, followed by a pause a June.

A slew of global central banks have paused their rate hike cycles amid easing inflation and slowing growth, with the Monetary Authority of Singapore being the latest to do so on Friday.

Data also showed that the Singapore economy in the first quarter of 2023, amid a sustained decline in manufacturing activity.

This saw the lag its peers for the day with a 0.2% dip. 

On the other hand, the was set for a 1.7% jump this week as a substantially stronger-than-expected spurred increased bets that the may yet raise rates higher.

While most Asian currencies advanced on Friday, sentiment towards risk-driven assets still remained frayed amid fears of a 2023 recession.

Risk appetite remained weak as the Fed sounded concerns over a “mild” recession later this year. Safe havens such as were among the best performing assets this week. 

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