Asia FX slips after strong rally, Dollar pinned at 1-Month Low by

By Ambar Warrick– Most Asian currencies fell on Thursday as investors locked in profits from a recent rally, while the dollar was pinned near one-month lows as markets bet on a less hawkish Federal Reserve. 

The South Korean economy was the worst performer, with a 0.7% drop in performance. 

Asia’s fourth-largest economy grew only 0.3% in the September quarter amid slowing exports and rising inflation. The Bank of Korea may not have enough room to continue raising interest rates aggressively, which could be a bearish sign for the won. 

Data showed that the index fell 0.5% in September, as it sank for the third consecutive month. 

According to reports, the Chinese government intervened at foreign exchange markets in support of the currency’s growth on Wednesday, causing the yuan to hit a 2-week high. The currency also rebounded from a 14 year low. 

Still, the outlook for the yuan remains constrained by China’s economic struggles. The currency will remain under pressure in the near term due to the growing gap between local and international interest rate. 

Broader Asian currencies have retreated from a recent rally. The dropped 0.3% while the lost 0.2%. Both currencies recovered 0.7% on Wednesday from near-record lows. 

The dollar recovered further after the government intervened for the second time in currency markets. Now, the focus is on Friday’s interest-rate decision by the lender, where it is widely expected that rates will remain at ultra-low levels. 

The rose 0.1% as did the. Both instruments remained at their lowest levels since mid September.

The markets are betting that a slowdown of the U.S. economic will cause the Federal Reserve to ease its pace of interest rates hikes. This notion has weighed down the dollar and also affected U.S. Treasury yields.

Markets expect a by Fed in November. However, markets are betting that the central banks will increase rates by 50 basis points in December. 


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