Asia FX Talk - Policymakers singing the same tune

The US dollar has lost some momentum over the last couple of trading sessions, providing reprieve for many Asian currencies.

  • By Lloyd Chan
  • Feb 08, 2024
  • FX
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Ahead Today

G3: US Initial jobless claims

Asia: China CPI and PPI, RBI meeting

Market Highlights

Several Fed officials spoke on Wednesday, echoing what Fed Chair Powell has said recently. The key takeaway from their speeches is that progress has been made on inflation, but they would like to see more evidence of inflation receding back to 2% and that there is no rush to cut rates. Federal Reserve Bank of Minneapolis President Kashkari said that two or three rate cuts seem appropriate this year, while Fed’s Collins said rate cut is likely later this year.   

ECB’s executive board member Isabel Schnabel warned against cutting rates too early given a resilient labour market and sticky services inflation. BOE Deputy Governor Sarah Breeden has become less worried about whether to raise rates, but more evidence of disinflation is needed for a policy pivot.

Mortgage applications in the US rose 3.7% in the week ending 2 February, following a 7.2% drop in the week before. US 30-year mortgage rates held relatively steady at 6.8%. German industrial production fell 1.6%mom in December, from a revised 0.2% drop in November, reflecting ongoing weakness in industrial activity.

Meanwhile, US stocks have continued to power ahead, with the S&P500 index nearing a historic 5,000 mark.

Regional FX

The US dollar has lost some momentum over the last couple of trading sessions, providing reprieve for many Asian currencies.

The Bank of Thailand (BoT) held its first meeting of the year yesterday, keeping the benchmark policy rate at a decade-high of 2.50% for the second straight meeting. But odds of a BoT rate cut have increased given a backdrop of a softer outlook for growth and muted inflation. The central bank has lowered its outlook for Thailand’s GDP growth to 2.5%-3% this year, from 3.2% previously.

Meanwhile, Taiwan’s exports jumped by 18.1%yoy in January. Export growth was broad-based across major product categories, particularly ICT products.

Later today, we will have the RBI meeting, where we expect no change to the policy rate. We will also get China’s headline inflation data, which is likely to show China has remained in deflation, reflecting weak consumer sentiment.

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