Asian markets respond to US rate cut: Yen hits one-month high
Most Asian currencies rose on Friday as the dollar weakened on continued expectations of a Federal Reserve interest rate cut in December, while the Japanese yen gained after hotter-than-expected inflation data from Tokyo.
Traders have increased their bets on a 25 basis point rate cut by the Fed at its December meeting, despite U.S. data earlier this week showing the economy remains resilient and inflation has remained steady.
The dollar index and dollar index futures were down 0.3% each in Asian trading.
Investors turned to regional economic indicators for cues as U.S. markets were closed for the Thanksgiving holiday on Thursday, leading to thin trading volumes on the last trading day of the month.
In Japan, data showed core consumer prices in Tokyo rose more than expected in November, pointing to rising inflationary pressures that reinforced expectations the Bank of Japan will raise interest rates in December.
The Japanese yen hit its strongest level against the dollar in just over a month, with USD/JPY down about 1%. The pair was set to fall about 3% this week.
Asian FX markets set for November losses as Trump backs dollar
Most regional currencies rose on Friday, but were headed for monthly losses as they faced downward pressure from US Republican Donald Trump’s election victory on November 5. Trump has proposed raising tariffs against China, raising concerns about a global trade war that could have dire consequences for Asian economies that rely heavily on trade.
USD/CNY onshore was down 0.2%, just shy of a four-month high. But the pair is set for a monthly gain of 1.6%.
The Singapore dollar (USD/SGD) was down 0.2%, while the Thai baht (USD/THB) was down 0.5%. The pair was on track for a gain of about 1.5% in November.
The USD/KRW pair was largely unchanged, a day after the Bank of Korea cut its benchmark interest rate for a second straight meeting in a surprise move. However, the won was set to lose nearly 1.6% against the dollar this month.
The AUD/USD pair rose 0.3% on Friday, but was on track for a monthly loss of 1%, while the Indian rupee USD/INR pair was set to rise 0.5% in November.
The Fed cuts rates by 25 basis points in December
Investors now see a 67% chance of a rate cut by the Federal Reserve in December, up from 55% a week ago, according to the CME Fed Monitor tool. This has led to some near-term weakness in the US dollar.
The dollar index is down about 1.6% this week, which included crucial data points. Data on Wednesday showed the personal consumption expenditures (PCE) price index — the Federal Reserve’s preferred measure of core inflation — rose in line with estimates. Another reading showed the U.S. economy expanded at a solid pace in the third quarter.
Alongside the data, the Fed’s latest minutes showed policymakers backing a gradual easing of interest rates, raising doubts about longer-term policy, especially in the face of inflationary measures under a Trump presidency.