Investing.com– Most Asian currencies moved lower on Thursday, coming under pressure from a stronger dollar as hawkish comments from the Federal Reserve bet on a slower pace of rate cuts in 2025.
The yen was an outsider, benefiting from more speculation about an interest rate hike by the Bank of Japan after wages data for November read stronger than expected.
But the yen, like most Asian currencies, nursed heavy losses in recent sessions amid pressure from a stronger dollar and rising US Treasury yields.
Weak inflation data from China also weighed on sentiment, as deflation largely remained in Asia's largest economy, despite recent stimulus efforts from Beijing.
The and remained steady in Asian trade after reversing a streak of more than two years on Wednesday.
The Fed's December meeting showed policymakers increasingly targeting a slower pace of rate cuts in 2025. Fed members also raised concerns about expansionary policies under President-elect Donald Trump that could be basis for inflation.
Yen rises as wages data spurs Jan rate hike bets
The Japanese yen strengthened on Thursday, with the pair falling nearly 0.3% and briefly breaking below 158 yen.
data read stronger than expected for November as Japanese wages continued to benefit from a big hike won earlier in 2024.
The data added to the idea of a virtuous circle in the Japanese economy – that rising wages will underpin inflation and give the Bank of Japan more incentive to raise interest rates sooner, rather than later.
“We think recent data – including solid spending, 2% above long-term inflation, and continued healthy wage growth – support a January hike,” said ING analysts in a note.
BOJ Governor Kazuo Ueda had indicated earlier that the bank would look at wage negotiations in March before deciding on a hike. But ING analysts said the case was building for a rise in January, although it would still be a close call.
Chinese yuan weakens on soft inflation
The Chinese yuan weakened on Thursday, hovering near its weakest levels in 17 years. The yuan pair rose 0.2% and remained well above the psychologically important 7.3 level.
inflation barely increased in December, and inflation decreased for the 27th month in a row.
The print showed little progress in China's long-running deflationary movement, and pointed out that Beijing likely needs to do more to boost economic growth.
Broader Asian currencies were mostly weakened on Thursday. The Australian dollar pair fell 0.1% as data grew less than expected in November, despite support from the Black Friday shopping event.
But Australia grew more than expected in November, supported by strong commodity exports.
South Korea's pair of winners fell 0.1%, amid continued efforts to arrest President Yoon Suk Yeol over a failed attempt to impose martial law.
The Singapore dollar pair was flat, while the Indian rupee pair rose slightly below the 86 rupee level.
