© Reuters.
Investing.com – Most Asian currencies maintained a narrow range on Monday, while the dollar held at a two-month high as signs of steady inflation and rising U.S. interest rates largely offset optimism about a U.S. debt ceiling deal.
It fell 0.1%, with little support from a stronger daily midpoint fix as markets continued to worry about slowing growth in Asia’s largest economy. The focus this week is on headline and sectoral data, due for release on Wednesday, to gauge the state of economic recovery in May, after dismal readings in April.
The resurgence of Chinese COVID-19 cases has also kept markets on alert nationwide, as infections are expected to peak by late June. The yuan has been one of the worst performing Asian currencies over the past month, especially after losing the key Level 7 against the dollar. The currency also approached its lowest level in six months.
Broader Asian currencies moved in a steady to lower range, even as top US lawmakers signaled they had reached a temporary deal to raise the debt ceiling and avert default economically. The deal triggered a rush across other risk-driven assets, such as stocks and commodities.
But the agreement is still being voted on in Congress before it becomes law. This also comes just a few days before the June 5 deadline to default.
The greenback was steady near seven-month lows for the dollar, while losses were led against the riskier Southeast Asian currencies.
steady 0.1%, with some support from strong commodity prices, while the Indian rupee moved slightly at its lowest levels in two months.
The pair held at its highest level in two months despite the improvement in risk appetite, as the general view of the currency was supported by expectations of more interest rate hikes by the Federal Reserve.
A reading – the Fed’s preferred measure of inflation – was higher than expected in April, fueling expectations that the Fed will raise interest rates further in June.
Markets are showing prices to have a roughly 65% chance that the central bank will raise interest rates by 25 basis points in June, a reversal of initial expectations of a pause.
The prospect of higher US interest rates bodes ill for Asian markets, as the gap between risky and low-risk rates is narrowing.
