Asian Currencies Decline as Dollar Strengthens After Hawkish Fed Minutes
Asian currencies moved lower on Thursday, pressured by a stronger U.S. dollar and renewed hawkish signals from Federal Reserve officials. The South Korean won and the Indian rupee led regional losses, while the Australian dollar outperformed after resilient domestic employment data.
The U.S. Dollar Index rose 0.1% after climbing roughly 0.6% overnight. U.S. Dollar Index futures also traded 0.1% higher by 23:56 ET (04:56 GMT), reflecting continued demand for the greenback.
Trading conditions across Asia were relatively thin due to Lunar New Year holidays in several markets. Subdued liquidity amplified currency moves, adding further pressure on regional foreign exchange markets.
Fed Minutes Signal Rates May Stay Higher for Longer
Minutes from the Federal Reserve’s latest policy meeting revealed a divided outlook among policymakers. While some officials expressed confidence in the current stance, others indicated that interest rates may need to remain elevated for an extended period. A few policymakers also signaled they would be open to additional rate hikes if inflation proves persistent.
These comments reinforced expectations that U.S. monetary policy will remain restrictive. As a result, higher-beta Asian currencies came under pressure amid concerns that elevated U.S. interest rates will continue to support the dollar.
Investors are now turning their attention to the upcoming U.S. Personal Consumption Expenditures (PCE) price index data, due Friday. The PCE index is the Fed’s preferred measure of inflation and is expected to provide further clarity on the future path of interest rates.
Regional Currency Performance
The South Korean won weakened significantly, with the USD/KRW pair rising 0.6%. The Indian rupee also declined, as USD/INR advanced 0.4%.
Elsewhere, the offshore Chinese yuan saw modest losses, with USD/CNH edging up 0.2%. The Singapore dollar softened as USD/SGD climbed 0.1%, while the Japanese yen also slipped, pushing USD/JPY 0.2% higher.
Australian Dollar Gains on Strong Jobs Data
In contrast to broader regional weakness, the Australian dollar strengthened after new labor market data showed resilience in the domestic economy. The AUD/USD pair gained 0.2% after Australia’s unemployment rate held steady at 4.1% in January.
Although employment growth moderated, the stable jobless rate signaled a still-tight labor market. The data reinforced the Reserve Bank of Australia’s hawkish stance after its recent interest rate increase, implemented in response to persistent inflation and firm employment conditions.
Markets continue to price in the possibility of further rate hikes from the RBA this year, providing relative support to the Australian dollar even as other Asian currencies struggle against a firm U.S. dollar.
