Asian currencies firmed on Thursday against a weaker dollar that was pressured by dovish comments from the Federal Reserve after the US central bank pushed back expectations of a rate hike anytime soon.
In its final policy meeting of a tumultuous year, when it was spurred to cut interest rates three times to forestall a slowdown fuelled largely by President Donald Trump’s trade war, the US central bank struck a remarkably sanguine tone, confident the actions it had taken so far are working.
The dovish remarks by the Fed put pressure on the greenback, sending the dollar index to a four-month low, providing support to emerging Asian currencies.
“Powell has focused on sanguine inflationary trends … whether we look at inflation expectations or even the Fed’s own projections on core personal consumption expenditure, “sustained” (rise in inflation) isn’t happening anytime soon, if at all,” Chris Weston, head of research at Pepperstone said in a note.
The Korean won strengthened the most in the region after it firmed 0.7 percent, wiping out weakness logged earlier this week.
Investor sentiment also improved after the senior deputy governor of the Bank of Korea said the central bank expects global uncertainties to ease further.
Meanwhile, the Taiwan dollar firmed as much as 0.6 percent to its strongest level since July 2018.
However, the rest of the Asian currencies witnessed only modest gains, given the Dec. 15 deadline for imposition of new tariffs on Chinese good by the United States.
Trump is expected to meet with top trade advisers on Thursday to discuss planned Dec. 15 tariffs on some $160 billion in Chinese goods, three sources familiar with the plans said.
The Chinese yuan remained stable, edging 0.1 percent higher against the dollar.
The Philippine peso also strengthened 0.1 percent ahead of its central bank meeting later in the day, where policy rates are expected to be kept steady.
The Philippine government cut its growth goals for 2021 and 2022 due to rising global uncertainties, including the US-Sino trade tensions. – Reuters