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Asian Currencies Increase, Hawkish Fedspeak Limits the Positive Trend

by Didimax Team

The Asian currencies rose on Friday after they were recovered from several red sessions. Meanwhile, sentiments were still stuck after the hawkish signal from Federal Reserve. 

That statement increased a concern that there will be more actions related to interest rate increase done by the central bank. Chinese Yuan is one of the currencies which have the best performance so far. 

That currency was noted 0.4 percent higher than before. However, Yuan may will slump this week by 0.3% because of the raising COVID-19 cases in China which was declared by the Government there. 

Besides that, the weakening economic growth was also weighting on that currency. Elsewhere, the Japanese Yen increased by 0.2% after the release of consumer inflation data. 


Consumer Inflation Data Increased by 0.2%

Based on that release it can be known that consumer inflation data was 0.2 percent higher. That was the highest level in 40 years and it happened on October this year. 

There is also a data which shows that Japan’s economic tension will be tighter. This thing pushed a speculation that the bank of Japan is possibly forced to tighten their monetary policies at the end. 

Central Bank has been maintaining the really low interest rate for more than one decade. So far, there is not any indication that they have a plan to raise that. 

However, that thing is also a reason of why Yen decreased drastically this year. It is when the interest rate increase happened on many countries which make so many traders sell the Yen for a better result. 

US Dollar was Sold at a Flat Position 

Meanwhile, the United States dollar was sold at a flat situation. However, the analysts said that it will get a small profit for this week after Federal Reserve stated their hawkish signal. 

It made market checked their expectation again, especially to the further interest rate. James Bullard as the Fed St. Louis president said that it was even under a dovish monetary policy.

He stated that on Thursday at a press conference. It seems that federal Reserve still needs to raise their rates because this year interest rate hike has a limited effect on inflation. 

Bullard also said that interest rate needs to increase at least five percent up to 5.25% from the current levelm.  That means close to 4% to handle inflation properly. 

Inflation May Changed Suddenly 

This month data showed that inflation in the United States of America was flat and also bigger than what people are expected in October. However, Bullard said his opinion about that. 

He believed that this can easily changed next week. His comment pushed dollar in a trade some days ago and it also supported the treasury yield in America. 

That is why; a situation like this also supported the weakening of most Asian currencies on Thursday. Until now, market is still wondering about 50 basis point increase chance.

It was relatively smaller done by the Fed in December. A Bullard’s comment due to a signal from Jerome Powell as a president of the Federal Reserve becomes an essential reference for market traders.

Philippines Peso Increased by 0.3%

Bullard commented that interest rate may reached it’s peak at a higher level than what people were expected before. It comes in line with the signal showed by Jerome Powell. 

In the Southeast Asia, the Philippine peso increased by 0.3 percent and that was supported by the increasing interest rate. It is especially by 75 basis point higher done by central bank.

Central Bank is also predicting some more hawkish steps to hold inflation. Besides That, it is also needed to match the interest rate speed increase done by The Fed. 

Rupiah’s weakening is also limited after the county central bank rose the rate on Thursday. It also gave a signal that there will be more actions taken to handle inflation. 



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