Most Asian currencies moved higher on Thursday as the U.S. dollar eased from a 13-month peak. The pullback allowed regional currencies to recover part of their recent losses.
However, expectations of further Federal Reserve tightening continued to support the dollar and limited gains across Asian foreign exchange markets.
The Indian rupee and Malaysian ringgit were among the strongest performers. The rupee gained approximately 0.4%, while the ringgit advanced 0.5%.
Investors took profits following the dollar’s recent rally but avoided making significant new moves ahead of the upcoming U.S. Personal Consumption Expenditures inflation report.
The PCE price index is the Federal Reserve’s preferred inflation measure and could influence expectations for future U.S. interest-rate decisions.
Malaysian Ringgit Leads Regional Gains
The Malaysian ringgit extended its advance after Bank Negara Malaysia introduced measures designed to attract foreign capital and encourage the return of overseas earnings.
These initiatives supported sentiment towards the currency and helped make it one of the best-performing Asian currencies during the session.
The U.S. Dollar Index declined 0.1% to 101.48 after reaching its highest level since May during the previous session.
Despite the modest decline, markets continued to price in the possibility of additional Federal Reserve tightening over the coming months.
Chinese Yuan Recovers Against the Dollar
China’s yuan also recorded a modest recovery. Both the onshore USD/CNY and offshore USD/CNH exchange rates declined by approximately 0.1%.
The Philippine peso, Indonesian rupiah and Thai baht gained between 0.1% and 0.4% as the softer dollar improved demand for emerging Asian currencies.
The South Korean won rose 0.2%, supported by a strong rally in domestic equities. The Taiwan dollar also advanced approximately 0.3%.
Japanese Yen Remains Near Multi-Decade Lows
The USD/JPY exchange rate was largely unchanged. However, the Japanese yen remained close to multi-decade lows against the dollar.
Currency traders continued to watch for signs that Japanese authorities could intervene to support the yen if its decline accelerates.
The threat of intervention has created additional caution around USD/JPY, although wide differences between U.S. and Japanese interest rates continue to pressure the currency.
Australian Dollar Steady After Employment Report
The Australian dollar traded close to $0.69 against the U.S. dollar after the release of stronger-than-expected employment figures.
Australia added 40,300 jobs in May, marking the strongest monthly employment increase in five months. Meanwhile, the unemployment rate unexpectedly declined to 4.4%.
The figures showed that Australia’s labour market remained resilient. However, they did not significantly change expectations for the Reserve Bank of Australia’s monetary policy outlook.
RBA Rate Hike Debate Continues
Capital Economics said the latest employment data was unlikely to resolve uncertainty over the RBA’s next policy move.
Nevertheless, persistent underlying inflation continued to support the possibility of one final precautionary interest-rate increase.
Such a move could help the central bank ensure that inflation is moving sustainably back towards its target.
New Zealand Dollar Stabilises
The New Zealand dollar also steadied after falling to a seven-month low earlier in the week.
Both the Australian and New Zealand dollars remain sensitive to changes in U.S. interest-rate expectations and movements in the broader U.S. dollar market.
Investors are also monitoring developments in negotiations between the United States and Iran. Together with the upcoming U.S. inflation report, these developments could shape near-term sentiment across global currency markets.
