Most Asian currencies moved in a flat-to-low range on Thursday, while the dollar steadied near a three-month high as markets steadily priced out expectations the Federal Reserve will cut interest rates in December.
Strong labor data also aided the dollar, although a prolonged U.S. government shutdown kept traders largely uncertain over the world’s largest economy.
The Japanese yen found some strength after data showed wage incomes grew as expected in September and improved from their slowest pace of growth in over a year.
Dollar steadies near 3-mth high as Dec rate cut bets cool The dollar index and dollar index futures both fell about 0.1% in Asian trade, but remained close to a three-month high hit in overnight trade.
The greenback was buoyed by growing bets that the Fed will not cut interest rates in December, especially after Chair Jerome Powell warned that a December rate cut was not a given.
Strong private economic data also buoyed the dollar, as ADP nonfarm employment read stronger than expected for October, signaling that the U.S. labor market remained robust.
Purchasing managers index data also showed U.S. business activity remained strong.
Traders focused more on private economic data for cues on the U.S. economy, as a government shutdown entered its 36th day and delayed the release of several key official readings.
Wednesday’s strong economic readings saw traders further price down expectations for a December rate cut. Traders were seen pricing in a 59.3% chance for a 25 basis point cut in December, down from 70.3% a day ago, CME Fedwatch showed.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads. Japanese yen firms on strong wage growth data The Japanese yen’s USD/JPY pair fell 0.2%, with the currency taking some support from strong wage income data.
Overall wage incomes grew 1.9% in September, as expected, and improved substantially from 1.3% in August– their weakest print in a year.
Strong wage growth gives the Bank of Japan more impetus to hike interest rates. Thursday’s reading came just a day after the minutes of the BOJ’s September meeting showed policymakers leaning towards a rate hike in the coming months.
The BOJ minutes had also offered the yen some support, with markets now positioning for a BOJ rate hike by as soon as December.
Broader Asian currencies moved in a flat-to-low range amid strength in the dollar. The Australian dollar’s AUD/USD pair moved little, showing limited reaction to strong export and trade balance data for September.
The Chinese yuan’s USD/CNY pair was flat, even as the People’s Bank set a slightly stronger midpoint for the day.
The Singapore dollar’s USD/SGD pair fell 0.1%, while the Taiwan dollar’s USD/TWD rose 0.2%.
The Indian rupee’s USD/INR pair rose 0.1% and remained well above 88 rupees.
