Asian FX Slips As Fed Hawks, Singapore Growth Concerns Weigh!

Asian FX Slips As Fed Hawks, Singapore Growth Concerns Weigh!

Asian currencies fell on Thursday as commitments from Federal Reserve officials to keep hiking rates despite a tempering in inflation pushed up the dollar, while a worsening growth outlook for Singapore also weighed.


The Chinese yuan sank nearly 0.3%, while the Japanese yen lost 0.2%. Most other Asian currencies were trading negative, after logging some gains on Wednesday.

As of 2321 ET (0321 GMT), the U.S. dollar index rose 0.2% after logging a 1.1% loss on Wednesday.

Dollar index futures were up 0.2% after a similar band of losses.

Minneapolis Fed President Neel Kashkari said while Wednesday’s softer-than-expected U.S. inflation report was a positive sign, the central bank is set to keep tightening policy until its inflation target is met, Reuters reported.

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This could see the target rate reach up to 4.4% by the year-end.

While Kashkari is considered to be the most hawkish Fed member, others also expect interest rates to keep rising, albeit at a slower pace. 

Stock markets rallied after the report, with traders now pricing in a 50 basis-point hike by the Fed during its next meeting- lower than initial expectations of a 75-point hike. 

In Asia, the Singapore dollar fell 0.1% after the island state narrowed its annual economic growth forecast to 3% to 4%, from 3% to 5%.

The country also revised its second-quarter GDP figure lower, citing increased headwinds from global economic weakness.

A bulk of these headwinds come from China, which is the largest trading partner of Singapore.

The mainland economy is struggling to recover from a series of COVID-19 lockdowns this year.

The Thai baht was flat after the central bank raised rates on Wednesday and kicked off a monetary tightening cycle.

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The baht has recovered steadily from lows hit this year, amid improving prospects for the Thai economy.

The central bank also signaled that a modest pace of rate hikes was needed to combat rampant inflation.

A dip in oil prices benefited Indonesia’s rupiah, which rose 0.5%. - Investing

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