Asia FX moves little, dollar steady as Fed-heavy week looms

By Ambar Warrick

Investing.com -- Most Asian currencies moved little on Monday, while the dollar steadied as markets awaited more signals on monetary policy from several Federal Reserve speakers and data sets due later in the week. 

Regional currencies were still reeling from hotter-than-expected U.S. inflation data from last week, which saw fears of more monetary policy tightening by the Fed return to the fore.

The dollar rose slightly against a basket of currencies, retaining most of its gains made last week amid strong inflationary signals and hawkish comments from Fed officials. 

The dollar index and dollar index futures rose less than 0.1% each, and were trading at six-week highs. 

Focus this week is on the minutes of the Fed’s February meeting, which is expected to shed more light on the central bank’s hawkish rhetoric on Wednesday. Fed officials, including Atlanta Fed President Ralph Bostic and Cleveland Fed President Loretta Mester, are also due to speak this week.

U.S. interest rates are widely expected to keep rising in the near-term, as hotter-than-expected inflation data and strength in the jobs market showed that the Fed has enough economic headroom to keep raising rates.

Markets are now uncertain over where U.S. rates could peak this year, with some analysts warning that rates could rise past 6%. 

Japan’s monetary policy is also the subject of focus this week, with the yen moving little on Monday. Kazuo Ueda, the newly nominated head of the Bank of Japan (BOJ), is expected to deliver a testimony on Friday, which will shed more light on the fate of the BOJ’s ultra-loose stance.  

China’s yuan was muted as the People’s Bank held its benchmark lending rates for a sixth consecutive month. The move indicated that Beijing plans to keep policy accommodative enough to support economic growth as the country re-emerges from three years of COVID lockdowns. 

A recovery in China bodes well for broader Asian markets that rely on the country as a trading destination. But economic data released so far has painted a middling picture of the economy. 

Southeast Asian currencies strengthened on Monday, but were nursing steep losses from the prior week. The Philippine peso jumped 0.7%, and was the best performer for the day.