Asia FX rises, dollar retreats ahead of nonfarm payrolls By Investing.com

Investing.com – Most Asian currencies rose on Friday, benefiting from continued weakness in the dollar as markets bet on a potential pause in the Federal Reserve’s rate hike cycle, with focus shifting to key employment data due later in the day.

The interest rate-sensitive index was the best performer of the day, rising 0.5% in an extension of sharp gains from the previous session. The won is also set to close the week up nearly 1.6%, amid easing pressure from the dollar and Treasury yields.

It rose 0.2% in light trade due to the holiday, and was set to close the week up about 1.7% as it benefited from increased safe-haven demand. Fears of a banking crisis in the US, along with a warning from the Federal Reserve about a possible recession this year, saw safe havens such as the yen benefit this week, with.

Its peers lagged, treading water as more-than-expected data raised concerns that the country’s post-COVID economic recovery was slowing.

The reading came on the heels of an unexpected contraction in manufacturing data, showing that China’s biggest economic engines are still struggling despite the lifting of anti-COVID measures this year.

The dollar was on track to close the week lower, with the pair down 0.2% on Friday. The US dollar saw an extended sell-off this week, as the Federal Reserve indicated that it is considering the possibility of a pause in the rate hike cycle.

Show that markets are pricing in a more than 90% chance that the Fed will keep interest rates steady in June, with the increase in May likely to be the last for the year. A raging banking crisis, coupled with signs of slowing economic growth, also reinforced this notion.

But the central bank also warned that future interest rate movement would be largely determined by labor market data. Inflation remains above the central bank’s target range, while the US labor market remains tight.

To that end, markets are now awaiting the April data, due later on Friday. While the reading is expected to show that the labor market is calm from the previous month, any surprises to the upside could influence the Fed’s decision.

Broader Asian currencies rallied on the hope of a possible Fed stall. They each rose about 0.2% while it added 0.3%.

It added 0.6% as a report from the Reserve Bank confirmed that interest rates may continue to rise after the bank earlier this week.