Asia FX slides, dollar strong after Fed flags higher rates
Investing.com-- Most Asian currencies tumbled on Thursday, while the dollar rose to six-month highs after the Federal Reserve warned that U.S. interest rates will remain higher for longer.
Markets were also largely risk-off before several more central bank rate decisions this week, most notably the Bank of Japan and the Bank of England.
Asian currencies were nursing steep overnight losses after the Fed kept rates steady, but warned that sticky inflation could invite at least one more hike this year.
The bank also said that rates will likely stay around 5.1% in 2024, dampening hopes that the Fed will cut rates at least four times next year.
The Japanese yen steadied around 148 after tumbling to a new 10-month low on Wednesday, while the Indian rupee fell 0.1% after coming close to record lows earlier this week. The rupee was also slammed by a spike in oil prices.
The rate-sensitive South Korean won lost 0.5%, while losses in commodity markets saw the Australian dollar shed 0.5%. The New Zealand dollar fell 0.3% even as data showed the island economy grew more than expected in the second quarter, after entering a technical recession earlier this year.
The Chinese yuan fell 0.2%, once again crossing the 7.3 level despite a series of strong daily midpoint fixes from the People’s Bank of China. The PBOC left its loan prime rates unchanged on Wednesday, as it struggles to support an economic recovery and stem further yuan weakness.
On the other hand, the dollar index and dollar index futures both rose around 0.5% in Asian trade, and were at their strongest level since early-March. 10-year Treasury yields surged to an over 15-year high.
The Fed’s warning heralds continued pressure on Asian markets, which were battered by a
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