Market Analytics and Considerations
Key Notes
The dollar’s rebound looked to have peaked on Wednesday, and markets are now waiting for new clues on U.S. monetary policy from the notes of the Federal Reserve’s December meeting. Most Asian currencies increased little on Wednesday.
Tuesday saw strain on regional currencies as the International Monetary Fund (IMF) issued a warning about a probable recession and worries about the increase in COVID-19 cases in China added to the pressure.
A basket of currencies saw the dollar increase by more than 1 percentage points as a result, forcing most Asian currencies to lose ground acquired at the start of the year.
On Wednesday, a dollar rise appeared to have petered out, helping regional units. On Wednesday, the South Korean won increased by 0.5percent while the Chinese yuan increased by 0.2%.
Although it traded under a 7-month top reached versus the dollar on Tuesday, the Japanese yen climbed by 0.3%.
According to statistics from Japan, manufacturing activity decreased for a second successive month as domestic companies struggled with out-of-control inflation and weak global consumption.
While marginally down, the dollar index and dollar index futures held onto much of their recent gains and were trading just below a two-week top. Markets are eager to learn if more officials backed the Federal Reserve’s decision to pause the rate hikes in the upcoming months by reading the minutes of its Meeting in December.
The probability that the Fed would tone down its aggressive rhetoric and raise interest rates by a even lesser 25 basis points in February is presently over 90%, according to the markets. This occurs at a time when there are more and more indications that US inflation having crested.
However, because U.S. inflation is still forecast to rise beyond the Fed’s yearly target range, the institution is widely anticipated to maintain its current monetary and fiscal policy in the following months.
Wider Asian currencies were slightly up, and markets were preparing for important business activities and nonfarm payrolls data due this week in the United States. Investors were constantly reviewing any economic data from large economies after the IMF issued a caution about a probable recession.
