Tuesday saw little movement in most Asian currencies as investors remained cautious ahead of several significant central bank meetings this week. However, the Australian dollar increased after the Reserve Bank increased interest rates.
Due to the RBA’s predicted 25 basis point increase in interest rates, the Australian dollar increased by 0.4% in choppy trading (bps). As it strives to strike a compromise between fighting inflation and preventing rate hikes from hurting the economy, the central bank also predicted higher inflation and slower economic growth for the year.
Related:Â Asian stocks rose before the Fed’s rate decision.Â
As markets awaited this week’s interest rate announcements from the Federal Reserve and the Bank of England, broad Asian currencies barely changed. Interest rates are anticipated to increase by 75 basis points at each central bank.
However, traders will also be keeping a close eye on the Fed for any hints as to when it plans to moderate its hawkish attitude. Asian currencies benefited from the Federal Reserve’s recent prediction that interest rate hikes will be limited to 50 basis points in December.
Both the dollar index and dollar index futures decreased by 0.2%. However, as markets prepared for the Fed meeting, both instruments held onto recent gains.
The value of the Chinese yuan was unchanged but was very near to its lowest point since the financial crisis of 2008. Data released this week revealed that China’s industrial industry contracted in October despite ongoing COVID-related shutdown restrictions. Following fresh outbreaks in Shanghai and Wuhan, sentiment toward the nation deteriorated, and Beijing declared it would not relax its tough zero-COVID policy.
The offshore yuan increased 0.2% after falling to almost historic lows.
The Japanese yen increased by 0.2% after the finance ministry revealed that Japan spent a record $42.8 billion interfering in foreign exchange markets to strengthen the currency in October. During the month, the value of the Japanese yen fell to a 32-year low versus the dollar, which most likely prompted the government to take remedial action.
However, government assistance has so far only offered the yen temporary support as it battles rising interest rates across the globe. Recently, the Bank of Japan kept its ultra-accommodative monetary policy in place and predicted greater inflation for this year.
The Indonesian rupiah decreased by 0.3% after softer-than-anticipated October inflation statistics suggested that the central bank would slow the pace of interest rate increases.
Related: Asian stocks go up as the Fed meeting nears, but China lags behind.
However, despite statistics showing a larger-than-anticipated decline in October exports, which indicates increased pressure on Asia’s fourth-largest economy, the South Korean won increased by 0.5%.
