Asia FX rallies, dollar sinks as Powell touts tepid rate hikes By Investing.com

By Ambar Warrick 

Investing.com– Most Asian currencies extended gains on Thursday, while the dollar slipped further after Federal Reserve Chair Jerome Powell said that the central bank will likely slow its pace of future , although weak economic data prints from China stifled sentiment. 

The was among the best performers, rising nearly 1% to 136.76- its strongest level to the dollar in more than three months. 

The currency was also aided by data that showed Japanese rose at its fastest pace in four years during the third quarter, which drove up hopes that the country’s shock contraction in its will be revised more favorably. 

The rose 0.2% after rallying over 1% in the prior session amid hopes of a broader lifting of COVID-19 restrictions in the country. Two major Chinese cities this week amid growing public ire towards the government’s zero-COVID policy.

But weak economic data tempered optimism over the Chinese economy. A showed China’s manufacturing sector- a bellwether for the economy- shrank for a third consecutive month in November, amid increasing pressure from anti-COVID measures.

This likely sets up the country for an economic contraction in the fourth quarter. 

Broader Asian currencies extended gains on Thursday, while the dollar fell further. The led gains across Southeast Asia with a 0.8% jump, while the firmed 0.3%. 

Among Antipodean currencies, the rose 0.4%, while the jumped 0.6%. 

The and both sank 0.3% and hovered near a 3-½ month low, after plummeting over 1% in the prior session.

But the greenback steadied on Thursday, while a risk-on rally appeared to be slowing amid warnings on the U.S. economy and uncertainty over the path of monetary policy.

While Powell , he also warned that U.S. interest rates will peak at higher-than-expected levels due to stubborn . Comments from Fed members in recent weeks reinforced the notion that future rate hikes will depend on the path of inflation. 

The Fed’s also underlined increasing amounts of pessimism over the U.S. economy, due to uncertainty over inflation and rising rates.

Concerns over Asian economies also grew following a slew of weak economic readings this week.

The lagged its peers on Thursday after data showed the country’s widened even further in November, due to worsening demand for its exports and increasing imports.