Most Asian currencies faced declines on Friday, while the dollar stabilized after recent losses, following hawkish signals from the Federal Reserve and robust U.S. labor data. The dollar index and dollar index futures showed minimal movements in Asian trade, set for modest weekly losses after slipping from three-month highs earlier in the week.
The outlook for the U.S. dollar remained positive as the Fed signaled a commitment to keeping rates higher for an extended period. Fed Governor Christopher Waller, in a late-Thursday statement, emphasized the need for more evidence of inflation cooling before considering interest rate cuts. This echoed sentiments from various other Fed officials and the minutes of the late-January meeting, reinforcing the central bank’s reluctance to initiate rate cuts soon. The unexpectedly low jobless claims over the past week further strengthened the perception of a robust labor market, diminishing the likelihood of early rate cuts.
The CME Fedwatch tool indicated traders reducing expectations for May and June rate cuts by the Fed, contributing to the negative sentiment in Asian markets. The narrowing gap between risky and low-risk yields kept most regional currencies lower for the week.
A market holiday in Japan limited trading volumes, but the yen remained above the 150 level against the dollar, prompting concerns about potential intervention by Japanese authorities. Persistent worries about Japan’s slowing economy, with an unexpected recession in the fourth quarter, contributed to a less favorable outlook for the yen.
Among other Asian currencies, the Chinese yuan experienced a slight decline amid continued speculation about additional stimulus measures from Beijing. The South Korean won depreciated by 0.2%, and the Singapore dollar remained flat ahead of key inflation readings scheduled for later on Friday.
The Australian dollar stood out as one of the few gainers for the day, rising by 0.2% as it extended a rebound from three-month lows. The Indian rupee showed stability but appeared to be moving away from the 83 level, supported by positive sentiment following a strong purchasing managers index reading on the service sector released on Thursday.