© Reuters.
Investing.com – Most Asian currencies fell on Friday, pressured by uncertainty about U.S. monetary policy after mixed economic readings this week, while the dollar held on to a 10-day high amid diminishing bets on interest rate cuts this year.
Risk-driven assets are set for a tough week after steady signs of US inflation, as well as slowing growth in China.
It was trading at a two-month low after disappointing data released this week that indicated a slowdown in economic recovery in Asia’s largest economy. The readings, which came on the heels of a sudden downturn in China, heightened expectations of further policy easing by Beijing.
This put the yuan within striking distance of Level 7 against the dollar, which is psychologically important for Chinese regulators and investors.
Weakness in the Chinese economy dampened sentiment towards the broader Asian markets. It decreased by 0.2%, while it decreased by 0.3%, although the data showed more than expected growth in the first quarter.
It fell 0.1%, but remained relatively supported by expectations of more rate hikes than before.
It fell 0.1%, and was set for a moderate weekly gain as fears of a US banking crisis and uncertainty about the debt ceiling prompted some safe-haven demand.
On the other hand, the dollar stabilized on Friday after strong gains this week. The and and are set to add about 0.8% all this week.
And while the sudden jump in the US signaled some calm in the labor market, flat inflation readings for April led to higher expectations that interest rates will keep interest rates high for longer this year.
US inflation and price inflation eased slightly in April, but remained well above the Fed’s target range.
It also showed that markets were tempering expectations on any interest rate cuts by the central bank this year.
Such a trend heralds further support for the dollar and is likely to put pressure on Asian currencies as the gap between junk and junk debt remains narrow. Most Asian central banks have ended rate hike cycles this year, providing little support for regional currencies.