Most Asian currencies were little changed on Friday after strong gains earlier in the week, while the dollar headed for a sharp weekly decline as weak jobs data fueled bets that the Federal Reserve will cut interest rates by mid-2024.
The dollar’s weakness put most regional units on track for a strong weekly performance, although much of those gains also came as Asian currencies rebounded from multi-month lows.
The Japanese yen has been one of the biggest beneficiaries of the dollar’s recent weakness and was on track for a 0.6% gain this week – its best weekly gain in more than four months. The currency has rebounded from a one-year low hit in early November.
However, Bank of Japan Governor Kazuo Ueda stressed the need to maintain an ultra-dovish stance on Friday, providing little near-term relief for the yen. Ueda’s comments also came just days after data showed Japan’s economy contracted much more than expected in the September quarter.
The South Korean won steadied near three-month highs on Friday and was set to gain 1.8% this week after signs of economic resilience in the country helped it rebound sharply from a recent one-year low.
The Australian dollar fell slightly on Friday and was set to gain 1.6% this week. The focus now is on the minutes of the Reserve Bank’s latest meeting, which are due next week.
The Singapore dollar traded sideways on Friday, taking some support from data showing an improvement in the country’s key non-oil exports. However, signs of continued weakness in China kept Singapore’s near-term economic outlook uncertain.
Chinese Yuan Heads for Weekly Gains, Rate Decision Ahead
The yuan was flat, heading for a weekly gain of 0.6% as it rebounded from a one-year low. Data released this week showed some signs of resilience in the Chinese economy, as industrial production and retail sales rose more than expected.
However, other economic indicators for October still pointed to continued weakness in the Chinese economy, especially as it slipped into disinflationary territory.
The focus is now on the People’s Bank of China, which will decide on its benchmark lending rate on Monday. However, the bank is expected to keep rates at record lows as it struggles to strike a balance between supporting economic growth and stemming the yuan’s weakness.
The Indian rupee was one of the few outliers this week, falling 0.1% on Friday and remaining close to record lows amid growing concerns that the Indian economy is running out of steam.
Dollar Set for Weekly Decline as Markets Focus on Fed Rate Cuts
The dollar index and dollar index futures were steady in Asian trading on Friday. But the greenback was set to lose nearly 1.5% this week as a string of middling economic readings fueled bets that the Fed is done raising interest rates.
After weaker-than-expected inflation readings for October, data on Thursday showed that weekly jobless claims rose more than expected for the fourth straight week.
The readings spurred growing bets that the Fed is done raising interest rates and will likely begin cutting rates by mid-2024.
Minutes from the Fed’s October meeting are due next week and are also expected to provide more clues about the central bank‘s outlook.
