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Asia FX Subdued Amid Debt Ceiling Issues; Powell’s Comment


The majority of Asian currencies struggled to find direction as the markets awaits additional clues on lifting the U.S. debt ceiling.

Meanwhile, the dollar fell as Federal Reserve Chair Jerome Powell gave a less aggressive comment than anticipated, which caused it to lose ground.

Dollar drops after Powell’s remark

As Federal Reserve Chair Jerome Powell gave a less hostile remark than anticipated dollar fell.

Powell said that the government wouldn’t need to raise interest rates by a significant amount due to the tighter credit conditions in the U.S., regional currencies experienced some reprieve.

As a result, the dollar experienced significant losses that continued into Monday’s Asian trading.

The dollar index & dollar index futures both decreased by around 0.2%, as speculation that the government will stop raising interest rates in June has grown.

A June pause has a nearly 83% possibility, according to the government Fund futures prices.

Though sentiment remained tense due to worries about a U.S. debt default, Asian currencies received little support from a falling dollar.

This week, President Joe Biden will continue discussions about lifting the debt ceiling with Republican lawmakers.

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People’s Bank of China assists Asia FX

The Chinese Yuan had the worst performance of the day, falling by 0.2% and returning to a low that hasn’t been seen in almost six months.

Biden’s suggestion of a potential improvement in Sino-U.S. relations and a stronger daily midpoint fix by the People’s Bank of China did little to help the Yuan.

On Monday, the PBOC maintained historic lows for the prime rate on its benchmark loan.

However, a slew of dismal April economic statistics prompted wagers that the PBOC would lower rates as soon as June.

The Yuan, which is already under pressure from a widening gap between domestic and American interest rates, received a weak prognosis as a result.

It is anticipated that the Yuan would continue to lose value after last week’s break of the psychologically significant 7 level.

Asian currencies in general were a mixed bag.

The less hawkish forecast for the Federal Reserve helped the rate-sensitive South Korean won increase by 0.6%, while the Australian dollar increased by 0.1%.

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More details

The likelihood of a halt in U.S. interest rate hikes helped the Japanese yen increase by 0.2%.

However, the currency had suffered significant losses during the previous two weeks as a result of the Bank of Japan’s indication.

Moreover, ther BOJ indication and its ultra-dovish monetary policy wouldn’t alter any time soon.

With statistics released indicating an unexpected decline in core machinery orders , economic measures have continued to depict a bleak image of the Japanese economy.


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