Asian Forex Firms As Dollar Firms Ahead Of Powell, Inflation Indices By Investing.com

Investing.com– Most Asian currencies strengthened on Thursday as the dollar steadied ahead of other interest rate cues, notably an intervention by Federal Reserve Chairman Jerome Powell later in the day.

The Chinese yuan continued to strengthen after hitting a 16-month high as traders cheered more stimulus measures from Beijing launched earlier this week. Optimism about China also boosted broader regional currencies.

The Japanese yen was an outlier, extending overnight losses as sentiment toward Japan soured ahead of the Liberal Democratic Party’s 2024 presidential election on Friday, which will effectively determine the country’s next prime minister.

The dollar cooled in Asian trade as an overnight rally stalled, with the greenback suffering steep losses in the past week after an interest rate cut by the Fed.

Dollar steady, Powell speech expected

And both steadied in Asian trade after posting a sharp rebound on Wednesday.

The greenback recovered some of its losses in the past week after the Fed cut interest rates by 50 basis points and marked the start of an easing cycle.

The focus this week is squarely on more cues from the Fed, with a number of policymakers set to speak in the coming days. he is due to speak later on Thursday.

data – the Fed’s preferred gauge of inflation – is due on Friday and is also expected to factor into the Fed’s next move. Before that, a revised reading for the second quarter as well as weekly data is scheduled for Thursday.

Chinese yuan firm as incentives persist

The Chinese yuan pair fell 0.2% on Thursday, remaining at its lowest level since May 2023.

The yuan made strong gains after Beijing unveiled a series of major stimulus measures aimed at supporting growth. The People’s Bank cut bank reserve requirements by 50 basis points while lowering mortgage rates.

The move boosted confidence in a Chinese economic recovery, supporting the yuan. But looser monetary conditions are expected to limit the yuan’s recovery.

Optimism over China boosted other Asian currencies, with the Australian dollar rising 0.3%.

The South Korean won pair was down 0.3 percent, while the Singapore dollar pair was down 0.2 percent. The Indian rupee pair edged higher after rallying on Wednesday.

The Japanese yen rose 0.1 percent, moving further away from 2024 lows, as sentiment toward Japan turned uncertain ahead of Friday’s LDP election, which is set to determine the country’s next prime minister.

Analysts expect a leadership change in Japan to hinder the Bank of Japan’s plans to raise interest rates in the short term.