Asia FX rangebound, dollar at 5-mth low as rate cut bets persist

investing.com:

Investing.com-- Most Asian currencies stuck to a tight range on Wednesday, while the dollar languished near five-month lows amid persistent bets that the Federal Reserve will begin cutting interest rates early in 2024. 

Regional currencies logged sharp gains in December after the Fed said it was done raising interest rates, with recent softer-than-expected inflation data suggesting that the bank could trim rates by as soon as March 2024. 

But December’s gains only served to trim steep losses in Asian currencies so far this year, as high U.S. interest rates and a largely resilient dollar spurred steady outflows from risk-heavy, high-yielding currencies through the year. 

Most Asian units were set for a muted end to 2023, although their outlook appeared somewhat brighter as the Fed flagged plans for interest rate cuts in the coming year. But while markets were optimistic over early cuts, the bank provided little cues on the timing of the planned cuts. 

Dovish signals from regional central banks also weighed on some Asian currencies. The Japanese yen fell 0.1% after the summary of opinions of the Bank of Japan’s December meeting showed most policymakers supported keeping monetary policy ultra-dovish in the near-term. 

While the central bank has flagged plans to eventually begin tightening policy in 2024, it provided scant cues on the timing of such a move

A dovish BOJ made the yen the worst-performing Asian currency in 2023, with the unit set for an over 8% loss against the dollar this year. 

Broader Asian units were also set for an underwhelming performance in 2023, as most regional central banks paused their rate hike cycles this year amid some cooling in inflation. The Australian dollar rose 0.2% on Wednesday and was set