Asian currencies saw a rise as the U.S. dollar dipped, signaling a pause in interest rate hikes by the Federal Reserve. Investors kept a cautious approach due to the upcoming release of important U.S. job data. In the midst of a Japanese holiday slowing down trade, regional currencies like the South Korean won, the Philippine peso, and the Indonesian rupiah performed well, with increases up to 1%.
The yen, despite the quiet market, edged up slightly but stayed near its lowest in a year, above 150 against the dollar. This has kept traders on alert for any potential action from Japan to control its currency value.
The Chinese yuan stayed steady, not moving much even after reports showed its service sector didn’t grow as much as hoped in October, though there was a small increase from the month before.
Easing Worries Over Rate Hikes, Eyes on U.S. Jobs Report
With the Federal Reserve not raising rates and hinting at a halt in future hikes, bets grew that there wouldn’t be more rate increases this year, with potential cuts starting in mid-2024. As a result, the dollar index, which measures the dollar against other currencies, slipped this week.
However, the dollar’s next big challenge is the U.S. nonfarm payrolls report due out later today. A strong job market could lead the Fed to raise rates, which might boost the dollar again. The expectation is that the job report might show a drop in new jobs, but recent data has been surprisingly strong.
Australian Dollar Anticipates Rate Decision
The Australian dollar saw a small drop but is set for a weekly rise due to predictions that the Reserve Bank of Australia (RBA) might increase interest rates next Tuesday.
Strong retail sales figures suggest that consumer spending might push inflation up. This, along with steady inflation and a solid job market, is likely to encourage the RBA to raise rates by 25 basis points. The RBA had paused rate hikes since May to see the impact on the economy, after a series of rate increases over the past year.