Asia FX weakens, dollar edges up with CPI data in sight
Investing.com-- Most Asian currencies weakened on Tuesday, while the dollar firmed as markets hunkered down before key U.S. inflation data that is widely expected to factor into the path of interest rates.
The inflation data comes after a chorus of Federal Reserve officials warned that the central bank was in no hurry to begin trimming interest rates in 2024- a trend that bodes well for the dollar and poorly for risk-heavy, high-yield currencies.
A week-long trading holiday in China and Hong Kong kept Asian trading volumes muted. But the Chinese yuan fell slightly in offshore trade.
The Japanese yen was among the worst-performing regional units in recent sessions, losing 0.1% on Tuesday and trading at 149.53- a near three-month low and just a hair away from breaking above the 150 level, which heralds more losses in the yen.
Losses in the yen came chiefly after a top Bank of Japan official signaled that even when the bank begins raising interest rates this year, it was unlikely to raise rates aggressively. This scenario presents little relief to the yen, which was pressured chiefly by a widening gulf between local and U.S. interest rates- a trend that is worsened by the prospect of higher-for-longer U.S. rates.
Fourth-quarter Japanese GDP data due this Friday is expected to show a limited improvement in growth, after an unexpected contraction in the third quarter.
Broader Asian currencies trended lower. The Australian dollar lost 0.3% and traded close to a three-month low. A private survey showed that Australian consumer sentiment rebounded to a 10-month high in early-February, amid increased optimism over easing inflation and no more interest rate hikes.
The South Korean won was flat, while the Singapore dollar shed
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