Most Asian currencies went down on Thursday as investors took profits from a recent rally. The dollar, meanwhile, was stuck near its lowest level in a month as markets bet on a less “hawkish” Federal Reserve.
The worst performer for the day was the South Korean won, which fell 0.7% after data showed that the South Korean economy barely grew in the third quarter.
In the September quarter, Asia’s fourth-largest economy grew by only 0.3%. This was because exports were slowing and prices were going up. The reading shows that the Bank of Korea might not have enough room to continue aggressively raising interest rates, which is bad for the won.
Related: Asian Stocks Go Up on Hopes for a Fed Pivot, but Australian Stocks Fall
China’s industrial profits fell for the third straight month in September, which caused the Chinese yuan to drop by 0.5%.
But on Wednesday, the yuan hit its highest level in two weeks after news came out that the Chinese government had stepped in to support the currency in the foreign exchange market. The currency also went from a 14-year low to a 14-year high.
Still, China’s economic problems make it hard to predict what will happen to the yuan. In the short term, the currency is likely to stay weak because of a growing gap between local and international interest rates.
After a recent rise, most Asian currencies went back down. The Indian rupee went down by 0.3%, and the Philippine peso went down by 0.2%. On Wednesday, when both currencies were near record lows, they went up 0.7%.
After the government was seen getting involved in currency markets for a second time, the value of the yen against the dollar went up even more. The focus is now on the Bank of Japan’s decision about interest rates on Friday. Most people expect the bank to keep rates at very low levels.
The dollar index and dollar index futures both went up by 0.1%. But both were near their lowest levels since the middle of September.
The markets are betting that if the U.S. economy slows down, the Federal Reserve will also slow down the rate of interest rate hikes. This thought pushed the dollar down and made U.S. Treasury yields go down as well.
Related: Asia FX Goes Up on Hopes for a Fed Pivot, and the Yuan Goes Up on Intervention
The markets still expect the Fed to raise rates by 75 basis points in November. But there are more bets that the central bank will only raise rates by 50 bps in December.
