Most Asian currencies moved lower on Wednesday as the U.S. dollar remained close to a 13-month high.
Expectations of further Federal Reserve interest-rate increases supported the dollar. Meanwhile, a sharp sell-off in global technology stocks increased demand for safe-haven assets.
South Korean Won Leads Regional Losses
The South Korean won was among the weakest-performing Asian currencies.
The USD/KRW exchange rate rose 0.5% to 1,539.9, even as South Korean equities recovered from earlier losses.
The move highlighted the continued pressure that rising U.S. Treasury yields and a stronger dollar are placing on regional currencies.
Dollar Strengthens on Federal Reserve Rate Bets
The U.S. dollar index gained 0.1% to 101.48, extending its recent advance.
Traders increased expectations that the Federal Reserve could raise interest rates again as inflation risks remain elevated.
Higher U.S. rates generally support the dollar by making dollar-denominated assets more attractive to international investors.
Markets Await Key U.S. Economic Data
Investors are now preparing for several important U.S. economic reports.
Upcoming releases include durable goods orders and weekly jobless claims. However, the main focus will be Friday’s Personal Consumption Expenditures price index.
The PCE price index is the Federal Reserve’s preferred inflation measure. Therefore, a stronger-than-expected reading could reinforce expectations of additional monetary tightening.
Chinese Yuan Weakens After PBOC Fixing
The Chinese yuan moved lower after the People’s Bank of China set a weaker daily midpoint for a fourth consecutive session.
The decision suggested that the central bank may be allowing greater exchange-rate flexibility as the U.S. dollar strengthens.
The onshore USD/CNY pair rose 0.2%. Meanwhile, the offshore USD/CNH exchange rate also gained 0.2%.
Japanese Yen Remains Near Intervention Levels
The Japanese yen remained close to multi-decade lows, with USD/JPY trading near 161.6.
The currency showed little reaction to a summary of opinions from the Bank of Japan’s June policy meeting.
The document showed that some policymakers supported further interest-rate increases after the central bank raised rates to 1%, their highest level in more than three decades.
Markets Watch for Japanese Currency Intervention
Investors remain alert to the possibility that Japanese authorities could intervene in the foreign-exchange market.
The yen is currently trading near levels that have previously triggered government action.
Currency intervention could involve Japan selling U.S. dollars and purchasing yen in an effort to slow the currency’s decline.
However, any sustained recovery may depend on the Bank of Japan adopting a more aggressive monetary policy stance.
Taiwan Dollar Slips Ahead of Industrial Data
The Taiwan dollar weakened 0.1% as traders awaited the country’s latest industrial production figures.
The data could provide further insight into the health of Taiwan’s export-driven economy and semiconductor industry.
Technology and chip exports remain important drivers of the country’s economic growth.
Australian Dollar Steady After Inflation Report
The Australian dollar was little changed after mixed inflation data.
Australia’s underlying inflation rate accelerated to 3.6% in May, exceeding market expectations.
The stronger core reading reinforced expectations that the Reserve Bank of Australia could keep interest rates elevated for longer.
However, softer headline inflation reduced the likelihood of an immediate rate increase.
Thai Baht Falls Before Central Bank Decision
The Thai baht weakened ahead of the Bank of Thailand’s latest monetary policy announcement.
USD/THB climbed approximately 0.6% before the decision.
Economists broadly expect the central bank to leave interest rates unchanged. Policymakers have repeatedly indicated that they are willing to look beyond inflation caused by temporary supply pressures.
Recent data showing that Thai inflation eased in May has also reduced the need for near-term monetary tightening.
Malaysian Ringgit Remains Under Pressure
Malaysia’s ringgit also weakened, with the USD/MYR exchange rate moving higher.
The decline came despite new measures from Bank Negara Malaysia designed to attract foreign investment and encourage companies to bring overseas earnings back into the country.
Nevertheless, continued dollar strength and expectations of higher U.S. interest rates remained the dominant forces across Asian currency markets.
