Anna 
Most Asian currencies maintained a narrow range on Friday, while the dollar rebounded from 3-½ month lows as market participants awaited further insights on interest rates from Federal Reserve Chair Jerome Powell.
After a robust rally in November, regional currencies cooled slightly amid increasing consensus that the Fed had concluded its interest rate hikes. The prevailing expectation is for the central bank to initiate rate cuts in 2024, prompting markets to seek clarity on the potential timing of such adjustments.
Mixed economic indicators from Asia added to the cautious sentiment. China’s yuan remained stable after a private survey unexpectedly indicated a rebound in manufacturing activity for November. However, this conflicted with official data released on Thursday, revealing a continued contraction in the manufacturing sector.
The Australian dollar saw a modest uptick following November’s as-expected contraction in manufacturing activity. Attention now turns to the Reserve Bank of Australia meeting next week, where the central bank is anticipated to maintain interest rates amid easing inflation.
South Korea’s won exhibited muted movement in response to mixed trade and manufacturing data, while the Indian rupee remained close to record lows despite data indicating faster-than-expected growth in the Indian economy during the September quarter. The Reserve Bank of India’s upcoming meeting is closely watched, with expectations of a steady interest rate stance.
The dollar’s resurgence from mid-August lows was driven by uncertainty surrounding the Fed’s potential shift. Overnight data revealed that the PCE price index, the Fed’s preferred inflation gauge, remained comfortably above the central bank’s 2% target in October.
Although the dollar index and dollar index futures dipped slightly in Asian trade after Thursday’s 0.7% surge, Powell’s scheduled speeches on Friday hold significance. Investors keenly await any changes in Powell’s rhetoric, particularly after other Fed officials hinted at the conclusion of interest rate hikes.
While Powell has largely maintained the stance that rates will remain higher for an extended period, the trajectory may be influenced by inflation trends. Several Fed members acknowledged a substantial drop in inflation this year, though it remained above the central bank’s target range.
As the dollar recuperates from substantial losses in November, marked by growing confidence in the Fed’s pause on interest rate hikes, Asian currencies, which had rallied during the month, remain under close scrutiny.
