Dollar Holds Firm After Hawkish Fed Signals
The US Dollar remained steady during Asian trading on Thursday, supported by a more hawkish tone from the Federal Reserve following its latest policy meeting.
The Fed kept interest rates unchanged, as expected, but internal divisions among policymakers highlighted rising concerns over inflation and the broader economic impact of geopolitical tensions.
Asian Currencies Under Pressure
The stronger dollar weighed on most Asian currencies. The Japanese yen weakened significantly, pushing past the key 160 level against the dollar, while the Indian rupee dropped to a record low.
Meanwhile, the Chinese yuan remained relatively stable after mixed economic data, and other regional currencies traded within a narrow range as markets stayed cautious.
Rising Oil Prices Add to Inflation Concerns
A major factor supporting the dollar has been surging energy prices. Brent Crude climbed above $120 per barrel, reaching its highest level since 2022 amid ongoing tensions between the U.S. and Iran.
Higher oil prices have intensified inflation concerns, reinforcing expectations that central banks may maintain tighter monetary policies for longer.
Fed Signals Growing Inflation Worries
While the Federal Reserve held rates steady, several policymakers opposed language suggesting future easing. This reflects growing unease about persistent inflation, particularly as energy costs rise due to supply disruptions linked to geopolitical conflicts.
The meeting also marked the final one under Fed Chair Jerome Powell, who is set to step down from the role soon while remaining within the central bank.
Yen Weakens Beyond Key Levels
The Japanese yen continued its decline, with the USD/JPY pair moving further above 160. This level has historically triggered intervention from Japanese authorities.
Despite recent signals from the Bank of Japan suggesting a more hawkish stance, markets remain skeptical about the likelihood of near-term rate hikes.
Indian Rupee Hits Record Low
The Indian rupee emerged as one of the weakest performers, falling to an all-time low against the dollar. Rising oil prices, which increase import costs for energy-dependent economies, have placed significant pressure on the currency.
Mixed Signals from China and Regional Markets
The Chinese yuan remained largely unchanged following PMI data that showed steady manufacturing growth but contraction in the services sector.
Elsewhere, the South Korean won gained slight support from stronger-than-expected retail sales and industrial production data. The Singapore dollar traded flat, while the Taiwan dollar weakened modestly.
