Asia FX rises, dollar at 5-mth low as soft inflation fuels rate cut bets
Investing.com-- Most Asian currencies moved in a tight range on Tuesday, while the dollar hovered near five-month lows as soft U.S. inflation data spurred increasing bets on interest rate cuts from the Federal Reserve in 2024.
Trading volumes were muted on account of year-end holidays in several major markets. A light economic release schedule this week also pointed to few novel cues for markets.
Still, a weaker dollar and optimism over rate cuts in 2024 put most Asian currencies on course for strong gains in December. Recent gains also helped Asian currencies recover a measure of losses against the dollar over the past year.
The Japanese yen rose 0.1% on Tuesday, as Bank Of Japan Governor Kazuo Ueda flagged some progress towards achieving the central bank’s 2% annual inflation target.
Progress towards the inflation target raises the possibility of an early policy pivot by the BOJ, Ueda said. The BOJ has kept interest rates at negative levels for nearly eight years.
The bank is still expected to pivot away from its ultra-dovish stance in 2024, although it has given scant cues on the timing of such a move. Still, a more hawkish BOJ bodes well for the yen, which was battered by rising U.S. interest rates through 2023.
Data released last week showed Japanese inflation fell sharply in November, and was now closer to the BOJ’s annual target.
Broader Asian currencies also advanced tracking a softer-than-expected reading on the U.S. PCE price index — the Fed’s preferred inflation gauge.
The Australian dollar rose 0.3% in holiday trade, while the South Korean won and the Singapore dollar added 0.2% each.
The Taiwan dollar rose 0.5%, while the Indian rupee lagged its peers, trading sideways near record lows.
The Chinese
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