by Ambar Warrick
Investing.com – Most Asian currencies fell on Thursday and the dollar held steady amid growing concerns that major central banks could raise interest rates, while concerns about slowing economic growth kept traders wary of risk-driven assets.
The and was flat on Thursday, pressured by gains in and following strong inflation reports in and.
But the markets have been swinging at about an 85% chance that it will raise prices in May, which is likely to support the dollar. This, combined with mounting bullish bets in June, dampened prospects for Asian currencies.
It fell 0.1 percent after the People’s Bank settled at its lowest level for the eighth month in a row. While the move boosts domestic liquidity and possibly economic growth, it also makes the yuan look less attractive as interest rates rise in the rest of the world.
Signs of an uneven economic recovery in China also weighed on the yuan, even as data showed the country grew more than expected in the first quarter. But China’s manufacturing sector–a driver of economic growth–continued to struggle as demand slowed.
Broader Asian currencies are trading in a flat-to-low range as markets become uncertain when the Federal Reserve will halt its rate-hiking cycle, amid high odds that the bank will hike in May.
It fell 0.1%, though losses were somewhat limited by an unexpected downturn in the massive country. The Japanese also grew more than expected in March, while rising at a slower pace than expected.
Media reports also indicated that the bank is open to tightening its ultra-loose monetary policy this year if wage growth maintains its current momentum, but is likely to keep policy unchanged next week.
It rose 0.1%, but has been dealing with heavy losses in recent sessions as investors have become less optimistic about India’s growth prospects this year. A Reuters poll showed that markets expect the Indian economy to slow significantly in fiscal year 2023 as it faces growing headwinds from the global economic slowdown.
It was among the worst performers of the day, falling 0.5% after a lower-than-expected Q1 reading, necessitating a less hawkish stance from Q1.
But given that inflation is still stuck near a 32-year peak, the RBNZ will likely continue to raise interest rates this year.