Asia FX Steady, Dollar Retreats from 4-½-Month High Amid Persistent Rate Uncertainty

Amidst minimal movement in most Asian currencies on Wednesday, the dollar eased slightly from its over four-month peak as markets remained cautious about the trajectory of U.S. interest rates.

The greenback surged to its highest levels since mid-November following a series of hawkish remarks from top Federal Reserve officials, resulting in significant declines in Asian currencies. These losses persisted on Wednesday, compounded by the adverse impact of a devastating earthquake in Taiwan on regional market sentiment.

USD/JPY Stabilizes Amid Watch for Intervention

The Japanese yen steadied on Wednesday after regaining some lost ground, with the USD/JPY pair hovering around the mid-151 level. While pressure from the dollar and the anticipation of prolonged higher U.S. interest rates pushed the yen to a 34-year low last week, it rebounded following warnings of potential currency market intervention by several top Japanese officials. This intervention threat bolstered the yen and curbed long positions on USD/JPY.

Chinese Yuan (USD/CNY) Holds Above 7.2

The Chinese yuan saw little movement on Wednesday, with gains in the USD/CNY pair limited by robust midpoint fixes from the People’s Bank of China. Despite this, USD/CNY remained comfortably above the crucial 7.2 level, signaling persistent fragility in sentiment towards the yuan. The yuan found little support from a private survey indicating that China’s services sector expanded as anticipated in March.

Wider Asian currencies maintained narrow ranges, with the Australian dollar’s AUD/USD pair edging up by nearly 0.1%, while the Taiwan dollar’s USD/TWD pair declined by 0.1%. The South Korean won’s USD/KRW pair dropped by 0.3%, and the Singapore dollar’s USD/SGD pair showed minimal movement. The Indian rupee’s USD/INR pair remained stable, remaining close to record highs above 83.

Dollar Eases from 4-½ Month High, Focus on Nonfarm Payrolls

The dollar index and dollar index futures each dipped by 0.1% in Asian trading, slightly retracting from their mid-November peaks. The dollar’s recent surge was propelled by several Fed officials’ warnings of prolonged high-interest rates in response to persistent inflation and robust labor market conditions. Attention now turns to Friday’s release of March nonfarm payrolls data, which has consistently surpassed expectations in recent months, reflecting ongoing strength in the U.S. labor market.
(Investing.com)