Asia FX upbeat, dollar at 4-mth low as markets look to 2024 rate cuts

Investing.com– Most Asian currencies steadied after a recent rally on Friday, while the dollar languished at four-month lows as traders positioned for deeper-than-expected interest rate cuts by the Federal Reserve in 2024.

More stimulus measures in China also aided sentiment, as the People’s Bank of China injected 1.45 trillion yuan ($200 billion) into the economy through its medium-term lending facility.

But the move offered little support to the , given that it signals that the PBOC will keep its loan prime rate at record lows next week. The currency traded sideways on Friday.

Economic data also offered some positive cues on China. grew more than expected in November, although and missed expectations.

Still, weakness in the dollar kept the yuan trading near a six-month high.

Broader Asian currencies advanced slightly, tracking a weaker dollar and as the prospect of lower U.S. interest rates drove investors into risk-driven, high-yield assets.

The – a major indicator of Asian risk sentiment- rose 0.3% to an over four-month high.

The steadied near a four-month high to the dollar, having appreciated sharply against the greenback in recent sessions. But further gains in the yen were uncertain, with the expected to maintain its ultra-dovish stance in its final meeting for the year on the coming Tuesday.

Purchasing managers index data pointed to more weakness in the Japanese economy, with a preliminary reading for December showing a deeper-than-expected contraction in .

Among the few outliers for the day, fell 0.2% after a strong run this week, while the hovered near record lows, having moved little against a weaker dollar.

While optimism over India’s economy drove local stocks to record highs, traders remained wary of the rupee on caution over India’s massive trade deficit. The Reserve Bank has also signaled no more interest rate hikes, despite a recent uptick in inflation.

Dollar languishes at 4-mth low, rate cuts in focus

The and fell slightly in Asian trade and were at their weakest levels since mid-August.

The greenback was set to lose about 2% this week after the Fed said it was done raising interest rates, and projected deeper rate cuts in 2024.

The Fed’s comments also spurred deep losses in U.S. Treasury yields, and diminished the dollar’s appeal as traders began speculating over just when the Fed will begin trimming interest rates.

show traders pricing in an over 70% chance for a rate cut in March 2024. Goldman Sachs expects the central bank to enact three, back-to-back 25 basis point cuts, beginning in March.

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