Asia FX weak as dollar surges to 1-year high on sticky inflation; Powell awaited

Investing.com– Most Asian currencies weakened on Thursday, while the dollar rose to a one-year high on data showing continued stickiness in U.S. inflation, with focus now turning to an upcoming address by Federal Reserve Chair Jerome Powell.

Sentiment towards regional markets remained weak after recent stimulus measures from China disappointed, while the prospect of more U.S. protectionism under a Donald Trump Presidency also kept traders biased towards the dollar. 

Most Asian currencies were nursing steep losses over the past week on this trade, with the Japanese yen and the Chinese yuan among the worst hit. 

Dollar at 1-year peak after CPI data; Powell in focus 

The dollar index and dollar index futures both rose nearly 0.2% in Asian trade, extending sharp overnight gains.

Consumer price index data read in line with expectations for October. But the headline CPI rate still rose from the prior month, while core CPI remained sticky and well above the Fed’s 2% annual target.

While the reading spurred bets that the Fed will still cut interest rates by 25 basis points in December, the long term outlook for rates grew more uncertain. 

Trump’s election also pushed up long term expectations for rates, on bets of more expansionary policies during his second term. 

Focus was now on an upcoming address by Fed Chair Jerome Powell, later on Thursday, for more cues on interest rates. Powell had reiterated the Fed’s data-driven approach to future easing after the central bank cut rates by 25 basis points last week.

Australian dollar at 3-mth low after RBA comments, jobs data

The Australian dollar weakened slightly on Thursday, with the AUDUSD pair falling 0.1% to a three-month low. 

Reserve Bank of Australia Governor Michele Bullock said that interest rates were unlikely to rise any further, but would remain steady until the bank was confident that inflation was easing further.

Bullock’s comments were accompanied by data showing Australia’s job market growth cooled in October from six straight months of strong growth. A softer labor market factored into expectations of further cooling in inflation, with analysts predicting that the RBA will begin cutting rates from the first quarter of 2025.

Broader Asian currencies weakened on Thursday and were nursing steep losses in recent sessions. The Japanese yen’s USDJPY pair rose 0.3% to 155.85 yen- a more than three-month high. The yen was also close to levels that had last sparked currency market intervention by the government. 

The Chinese yuan’s USDCNY pair rose 0.3% and was at an over three-month high, as the yuan was battered by underwhelming stimulus measures from China. Sentiment towards China was also strained by the prospect of high U.S. trade tariffs against the country, under a Trump administration.

The South Korean won’s USDKRW pair rose 0.1%, while the Singapore dollar’s USDSGD pair rose 0.2%.

The Indian rupee’s USDINR pair steadied after hitting a record high of over 84.6 rupees this week.