A number of Asian currencies weakened this Monday against the Dollar which is not coming slow while the markets are keenly waiting for the key data from the Feds meeting which will reveal U.S. inflation data and Feds monetary policy, a decisive factor for the future course of dollar and global markets.
Many businesses and corporations are carrying the burden of losses amid dollar hikes and 2023 recession fears which is posing a risk to the potential uplift of Asian FX as well. The Chinese Yuan and Indonesian rupiah fell 0.3% in the global market whereas the Malaysian ringgit and the South Korean won were shaved off 0.5% each.
Whilst a highly awaiting conclusion of the Feds meeting is in pipeline, the central bank made its move by making interest rates hike by 50 bps but stating that future interest rate hikes will be monitored closely.
Although China is lifting the lockdown and emerging from COVID-19 after three years, there are still fears of infection spreading upon reversing anti-COVID measures. However, the Asian countries that depend on the Chinese market for their economy highly await the comeback of China.
The Japanese yen also tasted the bitter fall of 0.2% signalling soaring inflation and a strained economy of the country. Data revealed persistent pressure on the economy and a difficult journey for the yen in the coming months, however, some sunny days are expected which will most likely ease the pressure of imports on the country.
As for the Indian rupee, the road is not very rocky. After falling by 0.3%, it slid a bit ahead of CPI showing that consumer inflation is at ease in the country and abrupt price hikes are not expected. Data is also showing a slow interest rate hikes policy by the Reserve Bank.
The dollar among the global currencies rose by 0.3% in the global market staying at 105 points. The consumer inflation data for November is highly awaited by investors as it will depict the inflation rise in the country and steer the Feds’ monetary policy regarding containing inflation and preventing recession. However, the producer price index (PPI) for November came down against expectations signalling the same unpredictable trend for the CPI in near future.
An unexpected rise in inflation will ask for a rabid monetary policy by the Feds. With that being the case, the central bank cannot stand on its statement of keeping a slow pace in interest rate hikes thus high interest will be looming all over the markets.
According to November stats, U.S. inflation is going to be an uninvited guest and plan on staying longer which is going to push Asian currencies further down the pit amid fears of a US recession.
The hikes in interest rates to avoid recession comes as a huge burden for Asian currencies and global markets as it will increase PPI and a ‘no-risk’ business will not be seen for a while.