Asian currencies creep higher as markets bet on more dollar weakness in 2023 According to

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By Ambar Warrick– Most Asian currencies were slightly higher in holiday trading on Monday, marking a positive start to the new year, as investors bet on a slower rate hike by the U.S. Federal Reserve and a weaker dollar.

It extended last week’s strong gains, rising 0.1% to 130.96, its strongest level against the greenback in five months. While the currency fell more than 15% in 2022, it recovered some lost ground late in the year, especially after unexpectedly striking a hawkish chord in its December meeting.

Still, the Japanese economy is bracing for headwinds, especially as high inflation and uncertainty surrounding the COVID-19 pandemic continue to dampen growth. Last month’s data showed it hit a 41-year high in November.

Offshore trade fell 0.1%, with economic figures released over the weekend showing the country contracted further in December as the country grapples with an unprecedented surge in COVID-19 infections. China has seen a massive spike in COVID-19 cases since easing most anti-COVID measures in December.

However, markets are positioning for an eventual economic recovery in the country as it re-emerges from nearly three years of strict lockdown measures that severely hampered growth.

The yuan, along with most Asian currencies, suffered steep losses in 2022 when it began raising interest rates. With US interest rates expected to remain high through 2023, this trend is expected to continue.

There was little trading on Monday and due to New Year holidays in most of the world. But the dollar is up nearly 8% in 2022 as the Federal Reserve embarks on one of its most aggressive rate-hiking cycles to curb runaway inflation.

However, the dollar has weakened in recent months after data showed it may have peaked, which is expected to lead to a slower rate hike by the Fed. The Central Bank has already raised interest rates by a relatively smaller 50 basis points in December, and in February.

It rose 0.1% after posting losses in 2022, with pressure on the currency mainly from India’s large trade deficit and dependence on oil imports. Although the country’s economy performed well in 2022, doubts are now being raised whether this outperformance will extend into next year.

It fell 0.6% after data showed the country’s reading remained negative in December, both of which narrowed significantly.

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