Asia FX tumbles, dollar hits six-week high amid rate hike angst By

By Ambar Warrick

Investing.com — Most Asian currencies fell on Friday, while the dollar hit a six-week high against a basket of currencies after stronger-than-expected inflation readings and hawkish comments from Federal Reserve officials drove up expectations of more interest rate hikes this year.

The was among the worst-hit Asian currencies, falling 0.6% to 134.72 against the dollar – its weakest level since late-December. The Japanese currency was also pressured by uncertainty over the path of monetary policy under new Bank of Japan Governor Kazuo Ueda.

Ueda faces the daunting task of steering the Japanese economy through rising inflation and weakening economic growth. Data this week showed the world’s third-largest economy grew at a in the fourth quarter.

The and strengthened sharply in Asian trade, rising 0.5% each to their highest levels since early-January. Treasury yields also surged overnight, as stronger-than-expected inflation data pointed to elevated price pressures in the U.S.

The reading came in line with a hotter-than-expected report earlier this week, and gives the more ammunition to keep raising interest rates.

Fed officials also struck a hawkish tone in separate speeches, warning that the central bank could raise interest rates at a sharper pace if sticky inflation persists.

Bullard said the bank’s March meeting could even result in a 50 basis point hike (bps), after the central bank hiked rates by a relatively smaller 25 bps earlier this month.

Rising U.S. interest rates bode poorly for Asian currencies, as the gulf between risky and low-risk debt narrows. Tighter U.S. monetary policy also opens the door to a potential U.S. recession this year, which could decimate sentiment towards risk-driven assets.

fell 0.2%, even as the government declared a after relaxing most restrictions earlier this year. Focus is largely on a Chinese economic recovery this year, which could benefit broader Asian currencies.

The sank 0.7%, while the fell 0.8%. The fell relatively less than its Southeast Asian peers, losing 0.3% as data showed the country’s key grew slightly in January from the prior month. But on an , exports plummeted far more than expected.

The fell 0.4% as data showed the country’s grew much less than expected in the fourth quarter.