Asia FX dips as traders scale back Fed cut bets; Japan Q3 GDP shrinks
Investing.com-- Most Asian currencies edged lower on Monday, led by the South Korean won, as market hopes for a U.S. interest-rate cut next month diminished and traders shifted focus to Japan’s weak third-quarter growth reading.
The US Dollar Index, which measures the greenback against a basket of major currencies, rose 0.1%. US Dollar Index Futures also traded 0.1% higher as of 04:55 GMT.
Investors increasingly believe that the Federal Reserve is unlikely to ease policy in the near term, a shift conveyed by several Fed policymakers who emphasised that inflation remains sticky and labour-market conditions are not yet clearly weakening.
Sentiment has been further dented by the recent data blackout caused by the U.S. government shutdown, which left investors without key macro indicators for weeks.
The shutdown delayed releases from the Bureau of Labor Statistics, including the September non-farm payrolls report, now due on Thursday.
With the probability of a rate cut in December slipping to around 40%, the dollar found a firmer footing, and Asian currencies came under pressure.
The South Korean won led losses on Monday, with the USD/KRW pair jumping 0.8%.
In China, both the yuan’s onshore USD/CNY and offshore pairs USD/CNH ticked 0.1% higher.
The Indian rupee’s USD/INR pair was largely muted, while the Singapore dollar’s USD/SGD gained 0.2%.
The Australian dollar’s AUD/USD pair edged down 0.2%.
Data on Monday showed that Japan’s economy contracted in the third quarter at an annualised decline of 1.8% -- weaker than earlier quarters but slightly better than the median forecast of a 2.5 % drop.
On a quarter-on-quarter basis, GDP fell 0.4%, which was slightly smaller than economists had forecast but still pointed to a loss of momentum.
The contraction was driven by weaker exports that reflected the impact of recently imposed U.S. tariffs. Private consumption contributed little to growth and rose only modestly due to persistent inflation pressures faced by households.
The only strong component within the data was capital expenditure, which increased and suggesting that companies remain willing to invest despite the trade headwinds.
The Japanese yen’s USD/JPY pair ticked 0.1% higher.
