Asian FX Market Jumps as Less-Honestic Fed Minutes Weigh on Dollar By Investing.com

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By Ambar Warrick

Investing.com– Most Asian currencies rose on Thursday, while the dollar fell as relatively dovish signals from the Federal Reserve bolstered expectations that U.S. inflation has peaked and the central bank will slow its pace of future rate hikes.

The euro was among the best performers on the day, rallying 0.8% after interest rates rose a relatively weaker 25 basis points. The central bank is trying to avoid economic shocks linked to high interest rates, in the context of growing tensions in the bond market. But the central bank gave no sign that it would stop tightening policy.

The market jumped 0.6% and was among the day’s best performers as local markets caught up to their regional peers after a public holiday on Wednesday. The yen was also trading near a three-month high.

The currency largely shrugged off data that had weakened in November, signaling more headwinds for the Japanese economy.

rose 0.4%, while its gains were muted somewhat as investors continued to worry about rising COVID-19 cases in the country. China is grappling with a record daily rise in infections, which has spurred the reintroduction of movement restrictions in several major cities.

But the weaker dollar and expectations of the Federal Reserve helped most Asian currencies weather concerns over China. The fell 0.3%, while it fell 0.4%, with both instruments nearing their lowest level in more than three months.

The Federal Reserve’s November meeting showed a growing number of Fed officials favoring smaller interest rate hikes in the coming months to gauge the economic impact of a sharp rise. interest rates this year.

Preliminary data for November showed that the United States contracted much more than expected under the pressure of high interest rates and stubborn inflation.

Although easing more than expected in October, it remained well above the Fed’s 2% annual target, necessitating further interest rate hikes by the central bank.

Fed members are also uncertain about where U.S. interest rates will peak, with a terminal rate during this up cycle appearing to be largely dependent on the path of inflation.

Among Antipodean currencies, the rose 0.4% on Thursday, although gains were dampened somewhat by concerns over China’s main trading partner.

Solid gains extended into a second straight session, rising 0.6% to a more than two-month high after interest rates rose at a record pace, and signaled more hawkish moves to curb .

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