Investing.com – Most Asian currencies weakened on Monday, while the dollar steadied at a nearly two-month high as strong labor market data and hawkish signals from the Federal Reserve prompted traders to reconsider bets on early interest rate cuts.
Regional currencies recovered from sharp losses on Friday after US data came in well above expectations for January, indicating continued strength in the labor market.
said in a Sunday interview with CBS 60 Minutes that the strength of the U.S. economy has given the Fed more room to maintain stable monetary policy for now. He also noted that the approach to any potential rate cuts is largely data-driven.
Powell’s comments came just days after the Fed sent similar signals during its first meeting of 2024 and spurred further gains in the dollar and Treasury yields.
In Asian trade, both indexes rose 0.1% to their highest levels since early December.
The index showed investors estimating an even lower chance of a rate cut in March, while traders also lowered expectations for a rate cut in May. Some analysts said they now expect the central bank to start cutting rates only by June.
This scenario does not bode well for Asian assets, given that high US rates are reducing the attractiveness of high-yield and risky assets.
Persistent concerns about China also weighed on regional currencies after a private survey showed activity rose less than expected in January. The fall was 0.1%, although further currency losses were stopped by a stronger midpoint fix and signs of intervention in the foreign exchange market by the People’s Bank.
This Thursday’s release is expected to bring few positive signals on the economy ahead of the week-long Lunar New Year holiday.
The fall was 0.1% as data showed a smaller-than-expected decline in the country in December. But the focus in Australia was on Tuesday’s meeting.
As the central bank sees inflation ease, traders will be watching for any signals that the RBA plans to start cutting interest rates this year.
The index was unchanged on Monday, helped by data showing the services sector grew more than expected in January.
But the yen traded just above a two-month low, suffering sharp losses on Friday as traders bet on higher, longer-term U.S. rates.
It was one of the day’s few outliers, rising 0.3% as it stood still ahead of release later in the week.
The fall was 0.2% after weak December data.