Asian currencies had a strong showing on Friday as the US dollar approached one-year lows on the back of soft inflation data. The Chinese yuan was among the top performers, rising 0.5% after a surprise increase in exports led to a stronger daily midpoint fix by the People’s Bank.
The Indonesian rupiah also saw significant gains, jumping 0.6%, while the Japanese yen firmed 0.1%. However, concerns over a 2023 recession continued to weigh on sentiment towards risk-driven assets.
Safe havens such as gold performed well this week.
The US producer price index inflation grew at a slower-than-expected rate in March, leading to the idea that the Federal Reserve would soon pause its rate hike cycle.
This also led to bets that the Fed has limited headroom to keep hiking rates, with markets positioning for one more hike in May, followed by a pause in June.
A number of central banks worldwide have already paused their rate hike cycles amid easing inflation and slowing growth. The Monetary Authority of Singapore was the latest to do so on Friday.
The Singapore dollar dipped 0.2% after data revealed that the Singaporean economy had slowed more than expected in Q1 2023. Conversely, the Australian dollar experienced a 1.7% surge after a stronger-than-anticipated employment report spurred bets that the Reserve Bank may raise rates higher.
While a sustained improvement in exports could lead to a bigger economic rebound for China, its data has so far painted a middling picture of recovery.