Asia FX rallies as dollar hits 2-month low on soft U.S. inflation

Asia FX rallies as dollar hits 2-month low on soft U.S. inflation
Asia FX rallies as dollar hits 2-month low on soft U.S. inflation
© Reuters

By Ambar Warrick– Most Asian currencies rose sharply on Friday, while the dollar hit a two-month low as softer-than-expected U.S. inflation data ramped up expectations that the Federal Reserve will slow its pace of interest rate hikes.

Sentiment was also aided by Hong Kong relaxing some COVID curbs, which spurred renewed speculation that China could do the same in the near-term.

rose 0.3% to 7.1669 against the dollar, its strongest level in over two weeks. on the prospect of some relaxation in COVID curbs.

But Chinese authorities have dismissed recent speculation over such a move, as the country faces its worst outbreak since May.

Broader Asian currencies rose, while the dollar sank as investors positioned for a smaller interest rate hike by the Fed in December. The was the best performer in Asia, rising 1.7% to a near three-month high, while the led gains across Southeast Asia with a 1.2% jump.

The and both drifted higher after rallying sharply in the prior session, while the rose 0.1% to a 1-½ month high.

Bucking the trend on Friday, the fell 0.6% after data showed grew at its fastest pace in over 40 years in October.

But the currency stuck to a two-month high against the dollar after surging 3% in the prior session.

The and fell 0.2% each, with both indicators languishing at a two-month low after data showed grew 7.7% in October, its slowest pace in nine months.

The reading gives the Federal Reserve impetus to hike interest rates by a relatively smaller 50 basis points in December. Markets are also positioning for such a move, with traders pricing in an of the Fed hiking rates at a slower clip.

A bevy of Fed members also said this week that they support such a move to avoid damaging the economy.

A slower pace of interest rate hikes is beneficial for Asian currencies, as it keeps gains in the dollar and Treasury yields subdued.

But given that inflation is still well above the Fed’s 2% annual target, the bank signaled it is likely to keep raising interest rates until it sees more favorable trends for prices.

Leave a Reply

Your email address will not be published. Required fields are marked *

New Brokers
2.8 rating
Buy & sell Crypto in minutes
3.0 rating
Note: Investing involves risks. You can lose your deposit. We advise you to only invest in financial products which match your knowledge and experience.
2.0 rating
Interactive Brokers attracts active traders with low per-share pricing, an advanced trading platform.
4.3 rating
eToro is the world’s leading social trading platform, with thousands of options for traders and investors.
Risk Warning: The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory or other services by AdonFinance. In addition, the content of the website offers no opinion with respect to the suitability of any security or any specific investment. Trading foreign exchange, stocks, cryptocurrencies and commodities is potentially high risk and may not be suitable for all investors. The high level of leverage can work both for and against traders. Before any investment with any broker you need to carefully consider your targets, previous experience, and risk level. Forex trading can result in the loss of your money, as a result, you are expressly cautioned that you should never invest or trade with money that you cannot afford to lose. For the avoidance of doubt, AdonFinance's service provides Brokers reviews in the Financial market. AdonFinance, its subsidiaries, agents or affiliates will assume no responsibility whatsoever for your trading activity. © Copyright 2021 AdonFinance