Investing.com – Most Asian currencies fell on Thursday, while the dollar reversed recent losses as a series of signals from the Federal Reserve showed the central bank was likely to keep interest rates high in the near term.
Weak Purchasing Managers’ Index (PMI) readings in Australia and Japan also led Asian traders to favor the dollar as business activity in both countries slowed in February.
The dollar stopped falling after the Fed confirmed its rate forecast
Both dollars steadied in Asian trading after sharp declines from three-month highs this week, although the prospect of further losses for the dollar now appears limited.
This showed that the bank is in no hurry to cut interest rates in the near future. Speeches by several Fed officials this week also reiterated that hawkish stance, with policymakers citing concerns about persistent inflation.
The report said traders are gradually lowering expectations for rate cuts in May and possibly June, which bodes poorly for Asian currencies as the gap between risky and low-risk returns remains narrow.
That thought sent most Asian currencies lower on Thursday. The fall was 0.1%, returning to 7.2, as investors remained doubtful about the country’s economic recovery.
Big losses in the yuan were capped by signs of government intervention in currency markets this week.
Japanese yen and Australian dollar hit by weak PMIs
The rate weakened 0.1% to return above 150 per dollar as the prospect of higher, longer-term U.S. rates pointed to a persistent gap between local bond yields and U.S. yields.
Weaker-than-expected PMI data also weighed on the yen as it fell further in February and growth weakened.
However, markets continue to monitor any intervention by the Japanese government in foreign exchange markets following some verbal warnings from ministers last week. However, the yen remained at a three-month low.
The index remained unchanged as February saw persistent weakness in business activity. But recent stronger-than-expected data released on Wednesday showed traders were pricing in a greater likelihood that the Reserve Bank of Australia would keep interest rates high for longer.
Asian currencies generally moved in a flat to tame range. The stack, while rising 0.2% after interest rates were left unchanged, signaled no immediate plans to ease monetary policy.
The pair is hovering just below 83 per dollar, which is expected to mature later in the day.