Most Asian currencies stayed in a narrow range on Thursday as the U.S. dollar remained supported by hawkish Fed forecasts. The Taiwan dollar plummeted the most amid persistent concerns about a dispute with China.
The Taiwan currency fell 0.2% to 30 per dollar, a two-year low. During U.S. House Speaker Nancy Pelosi’s visit to Taipei, tensions with China escalated, hurting the yuan.
China is reportedly cyberattacking Taiwan’s Defense Ministry and flying drones over some islands. China protested Pelosi’s visit, saying Taiwan is its territory.
Xinhua reports that China plans military manoeuvres near Taiwan’s sea border.
Thursday saw tight trading in most Asian currencies. The Chinese yuan held steady at 6.7562, while the Japanese yen halted a recent advance at 133.76.
The Australian dollar climbed 0.2% after the country’s record trade surplus in June. Demand for Australia’s coal and iron ore drove the reading.
Friday’s U.S. payrolls report subdued currency market sentiment. A good result could prompt the Fed to raise rates more sharply this year. Overnight, hawkish Fed statements bolstered expectations of a faster pace of policy tightening this year, boosting the dollar.
Thursday’s dollar index was steady after a 1% weekly gain. U.S. Dollar futures were subdued.
The Indian rupee slipped 0.4% before Friday’s expected rate hike. Rising oil costs have weakened the currency this year.
Indian inflation has risen to two-year highs because the central bank has lagged behind its Asian neighbours in tightening policies. Friday’s move will likely return interest rates to pre-pandemic levels.
