Asia FX surges as less hawkish Fed minutes dent dollar

By Ambar Warrick

Investing.com-- Most Asian currencies rose on Thursday, while the dollar retreated as relatively dovish signals from the Federal Reserve ramped up expectations that U.S. inflation has peaked and that the central bank will lower its pace of future rate hikes.

The South Korean won was among the best performers for the day, rallying 0.8% after the Bank of Korea hiked interest rates by a relatively smaller 25 basis points. The central bank is trying to avoid economic shocks from high interest rates, amid signs of growing stress in the bond market. But the central bank gave no signs that it will stop tightening policy.

The Japanese yen jumped 0.6% and was among the best performers for the day, as local markets caught up with their regional peers after a holiday on Wednesday. The yen was also trading close to a three-month high.

The currency largely shrugged off data that showed business activity shrank in November, heralding more economic headwinds for the Japanese economy.

China’s yuan rose 0.4%, while gains in its offshore counterpart were somewhat muted as investors continued to fret over rising COVID-19 cases in the country. China is grappling with a record-high daily increase in infections, which spurred the reintroduction of movement curbs in several major cities.

But a weakening dollar and expectations of smaller interest rate hikes by the Federal Reserve helped most Asian currencies look past concerns over China. The dollar index fell 0.3%, while dollar index futures sank 0.4%, with both instruments coming close to their weakest level in over three months.

The minutes of the Federal Reserve’s November meeting showed that a growing number of Fed officials supported smaller interest rate hikes in the coming months to gauge the economic impact of a steep rise in interest rates this year.

Preliminary data for November showed that U.S. business activity contracted far more than expected under pressure from high interest rates and stubborn inflation.

While inflation eased more than expected in October, it still remained well above the Fed’s 2% annual target, necessitating more interest rate hikes by the central bank.

Fed members are also uncertain over where U.S. interest rates will peak, with a terminal rate during this hiking cycle appearing to be largely dependent on the path of inflation.

Among Antipodean currencies, the Australian dollar rose 0.4% on Thursday, although gains were somewhat held back by concerns over major trading partner China.

The New Zealand dollar extended strong gains into a second consecutive session, rising 0.6% to an over two-month high after the Reserve Bank hiked interest rates by a record pace, and signaled more hawkish moves to curb inflation.

Begin trading today! Create an account by completing our form

Privacy Notice

At One Financial Markets we are committed to safeguarding your privacy.

Please see our Privacy Policy for details about what information is collected from you and why it is collected. We do not sell your information or use it other than as described in the Policy.

Please note that it is in our legitimate business interest to send you certain marketing emails from time to time. However, if you would prefer not to receive these you can opt-out by ticking the box below.

Alternatively, you can use the unsubscribe link at the bottom of the Demo account confirmation email or any subsequent emails we send.

By completing the form and downloading the platform you agree with the use of your personal information as detailed in the Policy.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.4% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Back to top

Office network
  • London Office
    One Financial Markets 

    1 Finsbury Market
    London
    EC2A 2BN
    United Kingdom


    T:  + 44 ( 0 ) 203 857 2000
    E:  info@ofmarkets.com
  • Dubai Office
    One Financial Markets 
    OT19-39 Central Park Tower
    Dubai International Finance Centre
    Dubai
    United Arab Emirates
     
    T: + 00 971 44 22 888
    E:  info@ofmarkets.com
     

One Financial Markets is the trading name of Axi Financial Services (UK) Ltd, a company registered in England with company number 6050593. Axi Financial Services Ltd is authorised and regulated by the Financial Conduct Authority in the UK (under firm reference number 466201) and the Financial Sector Conduct Authority in South Africa (with FSP number 45784).

The information on this site is not directed at residents of the United States, Belgium, Poland or any particular country outside the UK and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

www.onefinancialmarkets.com is owned and operated by Axi Financial Services (UK) Ltd.

Award winning broker
We have been presented with a number of awards that recognise the quality of our service and dedication to our clients :

Best FSA Regulated Broker
Saudi Money Expo

Best Education Product
Saudi Money Expo

Best Broker - Online Trading
IAIR Awards

Best Institutional Broker
Saudi Money Expo

Best FX Services Broker
CN Forex

Top International
FX Broker 2015

Saudi Money Expo

Broker of the Year
Online Trading – Middle East

IAIR Awards

Best Forex
Customer Service 2018

JFEX Awards

We accept the following payment methods: