© Reuters.
Investing.com – Most Asian currencies fell on Thursday, while the dollar strengthened as Federal Reserve Chairman Jerome Powell signaled the possibility of an interest rate hike, citing pressure on regional markets.
Speaking at the A, Powell said that while the Fed has come a long way in its battle against inflation, there is still the possibility of raising interest rates at least twice to curb stubborn inflation.
His comments sent the dollar and Treasury yields higher, both up 0.2% in Asian trade. The anticipation of the US – the Fed’s preferred inflation gauge – also sent traders into the greenback.
The prospect of higher US interest rates affected most regional units, since they indicate a narrowing of the gap between risky and low-risk returns.
The interest rate-sensitive index fell 0.5% and was the worst performer of the day, while it rose 0.1% on stronger-than-expected May data.
Regional trading volumes were also somewhat thin due to market holidays in India, Indonesia, Malaysia and Singapore.
The Chinese Yuan is nearing an 8-month low, with focus on PMIs
It fell 0.1% against the dollar, near an eight-month low, despite repeated attempts by the People’s Bank to support the currency.
The People’s Bank of China (PBOC) set a much stronger-than-expected daily midpoint for the Chinese currency, though it offered little support for the yuan.
The yuan has been pressured largely by deteriorating sentiment about China’s economic recovery this year, which also prompted interest rate cuts by the People’s Bank of China earlier in June.
The focus now is on the key data for June, which is due on Friday. The reading is expected to show a deeper contraction while growth is expected to slow in .
Concerns about slowing growth in China have also dampened broader sentiment towards Asian markets, given the country’s key role as a regional trading hub.
The stability of the Japanese yen amid intervention control
The Japanese yen moved slightly on Thursday, hovering near eight-month lows against the dollar.
The currency got a bit of a boost from stronger-than-expected data for the month of May, indicating some resilience in the Japanese economy.
But the markets were largely focused on any actions from the Japanese government to support the yen, after verbal warnings from top finance and currency ministers.
Analysts expect the government to step in after the yen crosses the 145 mark, with the currency trading less than 1% from the level.