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Asian Currencies Stagnate, Dollar Eases from 4-½ Month Peak Amid Rate Uncertainty

Most Asian currencies saw little movement on Wednesday, with the dollar retracing slightly from its over four-month high as markets continued to grapple with uncertainty surrounding U.S. interest rate trajectories.

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The dollar’s ascent to its highest levels since mid-November, driven by hawkish remarks from senior Federal Reserve officials, led to significant declines in Asian currencies. These losses were largely sustained on Wednesday, with sentiment further dampened by a devastating earthquake in Taiwan, which weighed on regional market sentiment.

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USD/JPY Stability Amid Intervention Watch

The Japanese yen found stability on Wednesday, recovering some ground after recent losses, with the USD/JPY pair hovering around the mid-151 level. Despite pressure from the dollar and the specter of prolonged U.S. interest rate hikes pushing the yen to a 34-year low last week, it regained some traction following warnings from top Japanese officials regarding potential currency market intervention to weaken the USD/JPY pair. The threat of intervention bolstered the yen and curbed any significant long positions on USD/JPY.

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Chinese Yuan (USD/CNY) Remains Above 7.2

The Chinese yuan saw minimal movement on Wednesday, with gains in the USD/CNY pair limited by robust midpoint fixes from the People’s Bank of China. Nonetheless, the USD/CNY pair remained comfortably above the crucial 7.2 level, indicating lingering fragility in sentiment towards the yuan. The yuan received little support from a private survey indicating expected growth in China’s services sector for March.

Stagnation in Broader Asian Currencies

Most other Asian currencies traded within narrow ranges. The Australian dollar’s AUD/USD pair edged up by nearly 0.1%, while the Taiwan dollar’s USD/TWD pair slipped by 0.1%. The South Korean won’s USD/KRW pair declined by 0.3%, while the Singapore dollar’s USD/SGD pair saw little change. The Indian rupee’s USD/INR pair remained stagnant, staying close to record highs above 83.

Dollar Edges Lower from 4-½ Month High, Nonfarm Payrolls Awaited

Both the dollar index and dollar index futures dipped by 0.1% each in Asian trading, slightly retracting from their mid-November peaks. The dollar surged in recent sessions following warnings from several Fed officials suggesting a possible prolongation of higher interest rates amidst persistent inflationary pressures and labor market strength. Further insights on the latter are anticipated with the release of nonfarm payrolls data for March this Friday, which has consistently outperformed expectations in recent months, underscoring the resilience of the U.S. labor market.

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