Market Analytics and Considerations
Although most Asian currencies made a small gain on Friday, they were expected to end the week lower as concerns about a global recession in 2023 increased in response to aggressive messages from major central banks and a number of dismal economic indicators.
Data revealed that overall commercial activity in the nation barely managed to increase in December, with improvement in the services sector balancing a noticeable downturn in manufacturing. The Japanese yen was one of the strongest performers for the day, climbing 0.5%.
However, the currency has also been projected to weaken by 0.5% this week, under pressure primarily from an upbeat dollar.
This week, when the Federal Reserve raised interest rates as anticipated and indicated that borrowing costs will likely peak at higher than anticipated levels as it continues to combat inflation, the dollar gained ground against the majority of Asian currencies.
Even though the United States reported lower inflation rates for November, a slew of weaker-than-expected U.S. economic statistics also dampened morale. However, the trajectory of price pressures is still substantially over the Fed’s targeted objective.
The dollar index as well as dollar index futures saw a weekly decline of roughly 0.9% as the euro and the pound gained strength in response to aggressive indications from the European Central Bank and the Bank of England.
Concerns over a probable recession were stoked by the prospect of rising interest rates in major nations, which dampened investor sentiment toward risky assets.
The hope for a future economic re – opening in China helped to underpin a 0.1% increase in the yuan. However, researchers have warned that China could soon experience an exponential increase in COVID-19 cases, which might delay a resumption and then further disrupt business as usual.
The yuan was also anticipated to depreciate this week by 0.2%, ending two weeks in a row of gains. A large body of unreliable economic data revealed that the epidemic has caused widening economic fractures in China.
Despite a 0.3% increase, the Singapore dollar was predicted to end the week down due to statistics showing that the nation’s main non-oil exports decreased far more than was anticipated in November. As a result, the nation’s trade surplus shrunk even more, signaling more economic deterioration for the island state.
Following a hint that future rate hikes will be gradual and moderate in the minutes of the central bank’s November meeting, the Thai baht was restrained on Friday but was the worst-performing Asian currency this week with a 1.2% decline.
The Australian dollar suffered the most among the other currencies this week, falling 1.2%, as weakening in China, a significant trading partner, signaled more economic concern for the nation.
