Most Asian currencies weakened on Wednesday as the dollar recovered a measure of recent losses with focus squarely on lower interest rates and growing concerns over U.S. fiscal health.
Traders remained cautious towards risk-driven Asian markets in the face of a legal challenge to U.S. President Donald Trump’s trade tariffs, which could force Washington into reassessing recent trade deals struck with major trading partners. This notion had weighed on the dollar earlier in the week.
Asian currencies took little support from strong economic prints from Japan, China, and Australia, although easing bets on more rate cuts by the Reserve Bank of Australia did keep the Australian dollar in positive territory.
The Chinese yuan’s USD/CNY pair rose 0.1%, taking limited support from private purchasing managers index data that showed stronger-than-expected growth in China’s services sector. The reading following positive private PMI on Tuesday, which showed some resilience in China’s manufacturing sector.
The Japanese yen’s USD/JPY pair rose 0.4%, while 10-year Japanese government bond yields jumped 0.6%. The yen took little support from PMI data showing outsized growth in both manufacturing and services activity in August.
The South Korean won’s USD/KRW pair fell 0.1%, faring better than its Asian peers after gross domestic product data for the second quarter read stronger than expected, inspiring some faith in the east Asian economy.
The Indian rupee’s USD/INR pair hovered close to record high of over 88 rupees, as traders fretted over the impact of 50% U.S. trade tariffs on New Delhi. Indian officials said that more bilateral trade talks with Washington were set to take place in the coming days.
The Singapore dollar’s USD/SGD pair rose 0.1%.
Dollar firms amid global fiscal concerns; tariffs, payrolls in focus
The dollar index and dollar index futures rose 0.2% apiece in Asian trade, with the greenback coming back in sight of highs seen at the beginning of the week. Traders pivoted into the dollar amid rising government bond yields across the globe, amid renewed concerns over high debt levels in the developed world.
Trump said on Tuesday his administration will ask the Supreme Court to weigh in on an appeals court ruling that said most of his trade tariffs were illegal, and should be withdrawn after October 14.
Focus this week is squarely on upcoming U.S. nonfarm payrolls data for more cues on interest rates. Markets were seen pricing in an over 90% chance the Federal Reserve will cut rates by 25 basis points later this month, CME Fedwatch showed.
Australian dollar inches higher as strong GDP dents RBA rate cut bets
The Australian dollar’s AUD/USD pair rose 0.1%, faring slightly better than its regional peers following stronger-than-expected GDP data for the second quarter.
The strong GDP print was driven chiefly by strength in private consumption and government spending, which offset weaker contributions from public investment and exports.
Capital Economics analysts said the strong print presented some risks to expectations of more interest rate cuts by the RBA, given that resilience in the economy reduces the urgency with which the RBA needs to loosen policy.
They noted that strength in private spending also stood to keep inflation sticky in the coming months.
Separately, Australian PMI data also highlighted strength in both manufacturing and services activity in August.
Source :
https://www.investing.com/news/forex-news/asia-fx-weakens-as-dollar-recoups-some-losses-amid-fiscal-concerns-rate-cut-bets-4220579
