On Monday, several Asian currencies dropped as the dollar gained strength, driven by the surge in oil prices due to an unexpected cut in OPEC+ production. The rise in fuel prices has raised concerns about inflation, leading to a bullish dollar.
Furthermore, weak economic data from Asia, including China’s struggling manufacturing sector, added to the downward pressure on Asian currencies.
China’s weakening economic growth is particularly worrying for Asian markets, which are highly dependent on China as a trading hub.
The dollar index and dollar index futures each increased by 0.5% against a basket of currencies, while several Asian currencies depreciated. The Japanese yen and Thai baht recorded the most significant losses, declining by 0.5% and 0.7%, respectively.
The Indian rupee also fell by 0.3%, with the possibility of further depreciation due to the high oil prices. However, losses in the rupee were curtailed ahead of the Reserve Bank of India’s meeting on Thursday, which is expected to raise interest rates.
Additionally, the Australian dollar dropped by 0.3% due to growing expectations that the Reserve Bank of Australia will halt its rate hike cycle when it meets on Tuesday. The South Korean won and the Taiwan dollar was also among the currencies that depreciated.
Despite Friday’s data showing a slight decrease in US inflation in February, the rise in fuel prices has increased concerns about inflation in the coming months. Fed Funds futures prices indicate that the market is pricing in a higher possibility of more interest rate hikes by the Federal Reserve.
Moreover, investors are eagerly waiting for nonfarm payroll data for March, scheduled to release on Friday, to get further indications on monetary policy.
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