Asian FX falls, dollar stable as strong inflation undermines rate cut hopes From

©Reuters.– Most Asian currencies held in a tight range on Monday, while the dollar settled near three-month highs as fresh signs of sticky U.S. inflation saw traders largely clear out expectations of first interest rate cuts in the United States.

E settled near three-month highs in Asian trading after inflation data released on Friday came in higher than expected for January.

The reading, coming just days after strong inflation, sparked further concerns that sticky inflation will prevent the Federal Reserve from cutting interest rates in early 2024. Such a scenario does not bode well for Asian currencies , with traders now pricing in the possibility of strong inflation. US rate cut only by June.

In Asia, Chinese markets resumed trading on a cautious note as traders waited to see whether a surge in spending during the week-long Lunar New Year holiday will persist in the coming weeks.

The decline fell 0.1% and remained near a three-month low, although further losses were capped by a sharp daily midpoint correction by the People’s Bank of China. The central bank is also expected to keep its benchmark unchanged on Tuesday, leaving the rate at record lows.

Broader Asian units also remained in a flat to low range. It moved little as it fell 0.3%.

The rise is 0.1% ahead of expiry on Tuesday. The RBA had warned at the meeting that it would not be possible to raise interest rates, which spurred some strength in the Australian dollar.

The price remained flat around the 83 level against the dollar, while it also rose sharply as data in the fourth quarter showed.

The Japanese yen flirts with 150 awaiting intervention

The dollar hovered around the 150 level as traders remained wary of any potential government action in the currency markets.

The yen fell to three-month lows over the past week on growing belief that the Bank of Japan will be slow to tighten its ultra-loose monetary policy. Pressures arising from the prospect of higher US interest rates for a longer period also weighed.

The 150 level is a key psychological point for the yen, as continuous forays above 150 have attracted strong measures from the Japanese government in the past. Top ministers issued verbal warnings to currency markets last week following the yen’s latest collapse.

Recent data showed that the Japanese economy in the fourth quarter of 2023.

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