© Reuters.
Investing.com – Most Asian currencies moved in a flat to lower range on Friday, pressured by a strong dollar after several hawkish signals from Federal Reserve officials this week, with focus now turning to an upcoming speech by Chairman Jerome Powell.
Concerns about a slowing economic recovery in China post-coronavirus also kept sentiment towards Asia bleak, after a series of weaker-than-expected readings from the country.
It fell 0.1%, hitting a five-month low as it fell further below the psychologically important 7 level against the greenback. The currency crossed the level earlier this week, and it is likely to experience further weakness in the coming days.
The markets are also betting that the market will cut interest rates further to support economic growth.
Most other currencies exposed to China fell on Friday. It fell 0.3%, while it lost 0.1%.
The index rose 0.2%, but was heading for a second consecutive week of losses as concerns about slowing domestic economic growth weighed.
It was also among the few outliers for the day, rising 0.2% as data showed that in the country it rose again toward a 40-year peak in April. A sustained rise in inflation could spur a hawkish view from the Bank, although the Bank recently indicated that it plans to maintain its ultra-loose policy in the near term.
The yen was also suffering heavy losses this week as optimism about a hike in the US debt ceiling led to sharp inflows from safe-haven assets. Democratic and Republican lawmakers have indicated that they are close to reaching an agreement to prevent defaults in the United States.
The positive signals, along with a series of hawkish comments from Federal Reserve officials this week, have pushed the dollar to its highest level in nearly two months.
It fell slightly on Friday, but was set to add about 0.9% all this week.
The general consensus among Fed officials was that US inflation remains very high, and is likely to see interest rates stay higher for longer. Some policymakers have also warned of possible further interest rate increases.
However, it showed that markets are broadly pricing in a pause in the Fed rate hike cycle by June. But with higher US interest rates likely to continue for much longer, Asian currencies are poised for more downside risks in the coming months.
The focus is now on a panel discussion taking place in the Washington DC conference later in the day, for more signals on monetary policy.