© Reuters.
Investing.com – Most Asian currencies fell on Thursday as the Federal Reserve announced at least two rate hikes this year after keeping interest rates steady, with the Japanese yen hitting a seven-month low ahead of a BoJ meeting.
The Fed on Wednesday, as the central bank takes stock of its rate hike cycle for more than a year. But the bank also raised its forecast for peak rates this year to 5.60% from 5.10%, which heralds at least two more hikes of 25 basis points.
The move signaled more pressure on regional currencies, with a widening gap between domestic and US interest rates. This triggered dollar flows, with up and around 0.3% each as Asian traders turned to the greenback.
Interest rate-sensitive Asian currencies recorded the sharpest declines, losing 0.7%, while most Southeast Asian currencies fell by about 0.3%.
It was steady, having pared early losses after a stronger-than-expected run.
The Japanese yen leads Asia’s losses as focus turns to the Bank of Japan
It fell 0.9%, topping losses in Asia despite better-than-expected data and data.
The focus was very much on this coming Friday, when the central bank is expected to maintain its ultra-loose monetary policy as it moves to support domestic growth. While the trend bodes well for Japanese stocks, further selling in the JPY is expected as rising interest rates in other parts of the world weighed on the JPY’s appeal.
BoJ officials, particularly new governor Kazuo Ueda, indicated that they will maintain the bank’s yield curve control policy for the time being, citing the need to support domestic economic growth.
The yen was also hit by declining bets that the Japanese government would intervene to stabilize the currency markets, as officials issued verbal warnings but took no action in this regard.
The Chinese Yuan is falling after more interest rate cuts and weak economic data
The index fell 0.1 percent, trading near a six-month low, after the People’s Bank of China (PBOC) cut interest rates on its medium-term loans on Thursday.
The move comes on the heels of cutting short-term interest rates earlier this week, and potentially presages a rate cut by the People’s Bank of China (PBOC) next week.
The interest rate cuts come as the Chinese government struggles to support a domestic economic recovery, amid stagnant manufacturing and weak spending.
Thursday’s data reinforced this notion, as all forecasts missed expectations for May.
