Asia FX rises, dollar index slides below 100 on waning rate hike bets

investing.com:

Investing.com-- Most Asian currencies rose on Friday, while the dollar hit a 15-month low against a basket of currencies as weak U.S. inflation readings saw investors pricing in fewer interest rate hikes this year.

Weak producer and consumer inflation readings released this week reinforced bets that the Federal Reserve was close to reaching peak interest rates, and that a hike in July could potentially be the last in the Fed’s current rate hike cycle.

This weighed on the dollar and spurred plays into more risk-driven assets, benefiting Asian currencies.

The Japanese yen rose 0.4%, hitting a two-month high against the greenback, while the Singapore dollar rose 0.3% after preliminary data showed that the island state’s economygrew more than expected in the second quarter.

The Australian dollar rose 0.1%, amid some uncertainty over monetary policy after the government named Deputy Reserve Bank Governor Michele Bullock as the new central bank governor.

The South Korean won rose 0.2%, while the Malaysian ringgit surged 1.5% amid speculation over currency market intervention by the Malaysian central bank. 

The dollar index and dollar index futures logged steep losses this week, falling below the 100 level for the first time since April 2022. Losses in the currency spilled over into Asian trade on Friday, with the two indicators losing about 0.2% each.

The soft inflation readings fueled bets that U.S. interest rates will peak at 5.50% in the current rate hike cycle, with the Fed widely expected to pause the cycle with a 25 basis point hike later this month.

Fed fund future prices showed that markets were pricing in a high chance of no further hikes this year, given that recent payrolls data also pointed to some cooling in the