Published 05/30/2024, 11:22 PM
Most Asian currencies weakened due inflation and interest rates in the coming days, as regional currencies were still reeling from a string of hawkish signals from the Federal Reserve, with officials warning that they needed much more confidence that inflation was easing, and some flagging the possibility of more rate hikes if inflation remained sticky. The dollar index and dollar index futures rose slightly in Asian trade, extending strong overnight gains and reaching their highest levels since mid-May, as traders remained largely biased towards. A revised reading on first quarter gross domestic product is due later on Thursday, expected to show continued resilience in the U.S. economy, giving the Fed more headroom to keep rates high for longer, while the main point of focus this week is PCE price index data, the Fed’s preferred inflation gauge, due on Friday, widely expected to show inflation remaining sticky through April, with several Fed officials also set to speak in the coming days. Further weakness in the yen was stymied by the possibility of more government intervention, after the government was seen intervening in currency markets at the beginning of May, with USDJPY reaching 160 triggering the last bout of intervention. Focus is now squarely on an upcoming inflation reading from Tokyo, due on Friday, for more cues on the Japanese economy, with any signs of increasing inflation potentially bringing some relief to the yen. Most Asian currencies weakened on Thursday, with the Japanese yen’s USDJPY pair falling slightly but remaining close to recent highs amid sustained weakness a sluggish Chinese economy. The Australian dollar’s AUDUSD pair traded sideways, taking little support from a stronger-than-expected inflation reading on Wednesday, while the Singapore dollar’s USDSGD pair rose 0.1% and the South Korean won’s USDKRW pair surged 0.5%. Focus is now on upcoming economic data, including Tokyo’s inflation reading on Friday and China’s purchasing managers index data, for more cues on the regional economy.