Asian currencies soar as dollar slumps ahead of Fed minutes

by Jonathan Adams
Asian currencies

The Chinese yuan was among the best performers for the day, adding 0.5 per cent to 7.1346 to the dollar- its highest level since late-July

Most Asian currencies gained sharply on Tuesday as easing concerns over higher U.S. interest rates prompted heavy losses in the dollar, with focus now turning to the minutes of the Fed’s October meeting.

Optimism over China also aided sentiment, as local media reports suggested that the government was planning to roll out more supportive measures for the troubled property sector.

The Chinese yuan was among the best performers for the day, adding 0.5 per cent to 7.1346 to the dollar- its highest level since late-July. The currency was also supported by a number of stronger-than-expected daily midpoint fixes by the People’s Bank of China, as Beijing moved to quell more weakness in the currency.

The Japanese yen benefited greatly from easing concerns of U.S. interest rate hikes, adding 0.6 per cent on Tuesday and extending a strong recovery from near 30-year lows. The currency was at 147.45 to the dollar – its highest level in three months.

Strength in the yen saw traders lower bets that Japanese authorities will need to intervene in currency markets. But the currency’s outlook remained weak in the face of a dovish BoJ.

The Taiwan dollar soared 0.9 per cent on Tuesday, extending recent gains amid speculation that a pro-China party could take the lead in the upcoming general elections- a scenario that could result in easing tensions with the mainland.

Other Asian currencies also gained. The Australian dollar added 0.5 per cent, as Reserve Bank of Australia Governor Michele Bullock cautioned that sticky inflation remained a cause for concern, pushing up expectations that the bank was not done raising interest rates.

The South Korean won added 0.3 per cent, while the Indian rupee largely lagged its regional peers, moving little and staying near record lows.

The dollar index and dollar index futures dropped 0.2 per cent each in Asian trade, extending recent losses as traders grew more convinced that the Fed was done hiking interest rates.

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