Investing.com – Most Asian currencies fell on Friday, while the dollar steadied from recent losses as hawkish Federal Reserve signals and strong U.S. labor data cast further doubt that a U.S. rate cut is imminent.
Both indexes were little changed in Asian trading and were on track for modest weekly losses after falling from three-month highs earlier in the week.
But the dollar’s outlook remains bright amid new signals that the Fed will keep rates high for a long time.
Hawkish Fed Comments, Strong Labor Data Will Further Impact Bet on Early Rate Cut
said late Thursday it needed more evidence that inflation was falling before the central bank would consider cutting interest rates.
His comments were the latest among a flurry of other Fed officials who said the bank was in no rush to begin adjusting monetary policy. Participants at the Fed meeting in late January also confirmed this message earlier this week.
Waller’s comments came just hours after data showed an unexpected decline over the past week, signaling continued strengthening in the labor market, giving the Fed even less incentive to cut rates early.
The prospect of higher and longer US rates bodes bad news for Asian markets as the gap between risky and low-risk returns narrows. This idea has led to declines in most regional currencies this week.
Traders continue to lower expectations for Fed rate cuts in May and June.
Yen above 150, intervention expected
Market holidays in Japan led to lower regional trading volumes on Friday. But the rate remained above 150 to the dollar even as Japanese ministers issued further warnings about potential intervention measures.
The yen’s outlook also weakened slightly due to persistent concerns about the slowdown in the Japanese economy after it unexpectedly entered recession in the fourth quarter.
Levels above 150 yen have prompted record-high intervention by the Japanese government in 2022, a trend that could repeat again if the currency’s weakness continues.
Among other Asian countries, the index slipped slightly amid continued scrutiny of whether Beijing will introduce additional stimulus measures to support the economy.
The fall was 0.2%, although the index remained unchanged ahead of key inflation measures due later on Friday.
The stock was among the few gains on the day, rising 0.2%, extending its rebound from three-month lows.
The price was flat but appeared to be moving further away from the 83 level. Sentiment on India was boosted by strong services sector data released on Thursday.