Asia FX Rises on Fed Pivot Hopes. Yuan Lifted Through Intervention By

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By Ambar Warrick — Most Asian currencies rose on Wednesday due to fears that economic headwinds could force the Federal Reserve’s hawkish stance. Meanwhile, the Chinese yuan rose in the wake of reports of government intervention into currency markets.

The index rose 0.2% to 7.28922, recovering from a low of almost 15 years. Major Chinese state-owned banks sold dollars in support of the currency’s onshore and recent weakness.

Concerns over China’s political climate saw the yuan fall sharply this week, with the offshore currency hitting a record low. Markets were also underwhelmed by that fell below the People’s Bank of China’s guidance.

Investors were wary about China’s new disruptive policies after Beijing reiterated that it would continue to adhere to its zero-COVID rule.

Other Asian currencies also saw an increase. The gain was 0.1% but was limited by fears about escalating geopolitical tensions on the Korean peninsula. With a 0.2% increase, the lead gains were in Southeast Asia.

After falling more than 2 percent over the past four sessions, the was largely unchanged. U.S. Treasury yields fell further from their highs of 14 years ago amid growing speculation that Fed officials will ease its policy stance by December.

Although markets are expecting a Fed rate hike in November at the very least, they are increasing their expectations of a smaller increase in December. Rising interest rates have weighed heavily on Asian markets and lifted the dollar to its highest level in 20 years.

The yen resisted the trend and fell 0.2%, as traders continued to place bets against government intervention in the currency market. The Bank of Japan’s reluctance to raise rates from record lows this year has battered the yen and ramped up inflation in the country.

The government intervention has only provided temporary relief to the currency, with the yen trading down around 30% for the year.

The Antipodean currencies saw 0.2% growth after September quarter data.

The reading suggests that the may have been too quick to ease its rate hikes. It is likely that rates will continue to rise in the near future.

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Stocksak Editorial

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