Most Asian currencies inched lower on Thursday, while the dollar nursed some overnight declines amid growing conviction that the Federal Reserve will cut interest rates this month amid persistent cooling in the labor market.
Regional currencies took limited support from speculation over U.S. interest rate cuts, with traders remaining largely averse towards risk-driven assets amid concerns over overstretched debt levels in the developed world. Safe havens such as gold benefited from this trend.
Most Asian currencies were also nursing a muted performance this week, as caution ahead of more cues on U.S. interest rates and the labor market kept traders to the sidelines.
Dollar muted amid rate cut speculation as payrolls test looms
The dollar index and dollar index futures rose marginally in Asian trade after logging some losses on Wednesday.
The greenback largely whipsawed around the 98 point level this week, amid increasing speculation over whether the Fed will cut interest rates later in September.
Weak JOLTS job openings data furthered the notion that the labor market was cooling, which in turn could spur the Fed into cutting rates to prevent further weakness. Several Fed officials raised such a possibility, after Chair Jerome Powell flagged the possibility of a September cut amid cooling labor growth.
Fed fund futures were pricing in a nearly 97% chance the Fed will cut rates by 25 basis points during its September 17-18 meeting, CME Fedwatch showed.
Before that, nonfarm payrolls data due this Friday is expected to offer more insight into the Fed’s plans to cut rates. The labor market and inflation are the Fed’s biggest considerations for rate cuts, with recent cooling in the labor market also eliciting dovish comments from Fed officials.
Soft purchasing managers index data released earlier this week also spurred some bets that the Fed will cut rates to support cooling growth.
Asia FX muted amid dearth of cues
Asian currencies kept to a tight range on Thursday amid a dearth of direct trading cues, with Friday’s payrolls data expected to provide more definitive signals for trade.
The Japanese yen’s USD/JPY pair rose 0.1%, as concerns over weak government bond demand in the country largely dampened the yen’s haven appeal. Key Japanese household spending and wages data is due on Friday and is likely to factor into inflation and rate expectations for the country.
The Australian dollar’s AUD/USD pair fell 0.2% even as trade data read substantially stronger than expected for July. Strong exports drove Australia’s trade surplus to a 1-½ year high in July.
The Chinese yuan’s USD/CNY pair was flat as investors digested some positive PMI data from earlier in the week, with Beijing is expected to dole out more economic support.
The Singapore dollar’s USD/SGD pair rose 0.1%, while the South Korean won’s USD/KRW pair rose 0.3%.
The Indian rupee’s USD/INR pair hovered close to recent record highs, as the rupee was battered by the U.S. imposing 50% trade tariffs against New Delhi. The duties are aimed at reducing India’s purchases of Russian oil, although Delhi has indicated that it does not intend to comply.
Source :
https://www.investing.com/news/forex-news/asia-fx-muted-dollar-weak-with-focus-on-labor-market-rate-cuts-4223294
