Investing.com– Most Asian currencies moved little on Monday, while the dollar held back from falling from more than two-year highs after soft U.S. inflation data fueled some hopes that interest rates will still fall in 2025.
Asian currencies were nursing big losses against the dollar since last week, although they pared some of the decline on Friday after soft inflation data. The outlook for regional markets remains clouded by uncertainty about US interest rates and policy under incoming President Donald Trump.
Dollar slips from 2-year high as PCE data misses expectations
The one and two of them stood up on Monday after taking a big loss on Friday.
The greenback slipped from a more than two-year peak after data – the Federal Reserve's favorite measure of inflation – read softer than expected on Friday.
However, the reading remained above the Fed's 2% annual target, keeping uncertainty about interest rates in play.
The Fed had cut interest rates by 25 basis points last week, but signaled a slower pace of interest rate cuts in the coming year, citing concerns about sticky inflation and labor market resilience.
The Fed is expected to cut rates twice in 2025, although the path of rates remains uncertain.
Markets took some relief from the government avoiding a shutdown after lawmakers approved an eleventh-hour spending bill.
Asia FX pressured by rate uncertainty
Despite some gains on Friday, most Asian currencies were still trading lower for December, as the outlook for interest rates remained uncertain.
The Japanese yen pair rose 0.1% to around 156.59 yen, after rising as high as 158 yen last week following dovish signals from the Bank of Japan.
The BOJ indicated that it was not considering raising interest rates in the short term despite a recent rise in inflation, and that it could raise rates as late as March 2025.
The Chinese yuan pair rose 0.1%, hitting a one-year high as traders continued to worry about China's economic outlook. While Beijing is expected to increase fiscal spending in the coming year to support the economy, easier monetary conditions are expected to weaken the yuan.
The Singapore dollar pair was flat ahead of inflation data due later in the day, while the South Korean winner rose 0.3%.
The Australian dollar pair rose slightly after sinking to a two-year low last week.
The Indian rupee pair stabilized after hitting a record high of over 85 rupees last week.
