Asian Currencies Weakens As US Nonfarm Payrolls Loom

On Friday, most Asian currencies declined, while there was a rebound in the US dollar, as investors were focused on more cues about the economy’s performance from the nonfarm payrolls data due later.

Meanwhile, markets were also dialing back bets on the US Federal Reserve hitting a pause on their monetary tightening cycle imminently.

Yuan drops

There was a 0.2% decline in the Chinese yuan, as results of a private survey disclosed that the massive services sector in China had bounced back from a low of four months in January.

This was after Beijing lifted most of the anti-COVID curbs. However, the data that had been released in the country earlier this week relating to the manufacturing sector was painting a rather mixed picture.

There is a possibility that the sector’s performance could delay a bigger recovery in the economy this year. There was also a decline recorded in most of the currencies that have exposure to China.

There was a 0.2% decline in the Singapore dollar, while a 0.3% drop was also recorded in the South Korean won.

A rebound in the US dollar also put pressure on regional units, as they recorded sharp gains overnight due to strong readings on unemployment claims on a weekly basis.

Job market

The data only increased concerns that inflation could continue to remain high for longer because of the strength of the labor market and this would push the Fed into hiking the interest rates.

Markets were now waiting for the nonfarm payroll data for the previous month that was due for release on Friday in order to get more cues about the US jobs market.

There was a 0.1% rise in the dollar index as well as dollar index futures, after they had bounced 0.5% initially, but were set to close the week unchanged.

The US dollar also received support against a basket of its peers because of weakness in both the pound and the euro, after their respective central banks hinted at potentially pausing their rate hiking cycles this year.

Strong performance

This week, most of the currencies in Asia were on course for recording strong performance, as traders were betting that the Fed could be driven to cutting rates by the year’s end due to a potential recession in the US.

However, the US central bank did not mention anything about rate cuts and instead delivered a rate hike, stating that they would continue to take action against inflation.

On Friday, there was a 0.1% gain in the Japanese yen after data showed that there was growth in the service sector of the country at a slightly lower-than-expected pace in the previous month.

The data came after readings had shown that the manufacturing sector in Japan continued to record declines.

The Indian rupee was also weighed down by the services sector data that turned out to be weaker than expected, as it dropped by 0.2%.

It also became the worst-performing Asian currency this week, as it fell 0.9% due to concerns about stretched fiscal spending after the 2023 budget was revealed by the government.