Investing.com — Most Asian currencies traded in narrow ranges on Thursday, recouping some overnight losses as minutes from the U.S. Federal Reserve’s latest meeting boosted the dollar amid growing concerns about higher interest rates for a long time.
The prospect of a renewed trade war between the U.S. and China after China retaliated against higher U.S. tariffs on key industries also dampened sentiment in most Asian markets. Chinese military drills in waters near Taiwan also spooked traders.
Dollar strengthens due to concerns about Fed minutes interest rate hike
and both steadied in Asian trade after posting big gains overnight.
Minutes from the Fed’s late April meeting showed policymakers growing concerned about rising inflation, with some Fed officials indicating they were prepared to raise interest rates further to curb it.
Ahead of the meeting, Fed officials gave a series of separate speeches in which rising inflation was likely to delay any potential interest rate cuts.
Although it remains unlikely that the Fed will raise rates further, markets are now pricing in a greater likelihood that the central bank will keep interest rates high for an extended period of time, leading to risk-driven This is a scenario that does not bode well for the Asian market.
The dollar strengthened on the outlook, trading at a one-week high.
Most Asian currencies fell sharply overnight against the dollar, but stabilized somewhat on Thursday. The Australian dollar rose 0.2% after falling 0.7% on Wednesday. Purchasing Managers Index data showed a cooling in .
The Japanese yen was little moved Thursday after soaring to nearly 157 yen in overnight trading. Japan’s PMI data showed expansion for the first time in 11 months.
As expected, interest rates were left unchanged, causing the Korean won to fall by 0.1%, but this year’s economic growth outlook was also slightly raised.
The Singapore dollar fell 0.1 percent after data reaffirmed that the currency’s growth pace in the first quarter was slightly slower than expected.
Chinese Yuan weakens, USDCNY returns to 6-month high
The Chinese yuan pair rose slightly on Thursday, trading just below its six-month high.
The Chinese government has banned some U.S. companies from participating in China-related trade activities, and is also believed to have banned some arms exports to Taiwan. The move is seen as retaliation for additional U.S. tariffs on key Chinese industries that will go into effect on August 1.
China has also conducted military exercises near Taiwanese territory, raising concerns about rising tensions in the region.
