Asia FX slips as dollar firms before the Fed; yuan hit by underwhelming stimulus

Most Asian currencies were subdued on Friday as the dollar strengthened ahead of a Federal Reserve rate decision next week, while disappointing cues on stimulus from a top-level meeting in China weighed on the yuan.

Investors remained cautious and avoided making significant moves ahead of the U.S. Federal Reserve meeting due next week, where a 25 basis point rate cut is widely anticipated. Concerns over the longer-term trajectory of interest rates tempered market enthusiasm, and gave dollar a boost.

The US Dollar Index rose 0.2%, while US Dollar Index Futures inched 0.1% higher in Asian trade in Friday. Chinese yuan slips as CEWC fails to deliver surprise stimulus

The Chinese yuan’s onshore USD/CNY pair rose 0.2% and was hovering near a two-year high mark, while offshore pair USD/CNH edged 0.1% higher.

China ended its two-day Central Economic Work Conference (CEWC) on Thursday, but left markets disappointed due to lack of aggressive stimulus measures, which investors had hoped would boost domestic demand.

China has pledged to boost its budget deficit, increase debt issuance, and ease monetary policy to sustain economic growth amid anticipated trade tensions with the U.S., a state media readout from CEWC showed. But markets saw the policies unlikely to provide the immediate economic momentum needed to counteract China's deflationary pressures.

The yuan has been under pressure, with consecutive weekly falls in the past few months due to impending U.S. tariffs under the incoming president Donald Trump. It was set to inch lower for this week.

“With our new house view on tariffs, we’ve turned a little more cautious on the near-term CNY outlook. A Trump trade unwind could help the CNY recover, but tariff developments could be catalysts for more depreciation,” ING analysts said in a recent note. Dollar set for best week in a month, Thai baht lead losses in Asia FX

The dollar index was set for its best week in over a month even as traders positioned for a Fed rate cut next week. But higher-than-anticipated producer price index  and largely in-line consumer inflation in for November led to markets pricing in a slower pace of rate cuts in 2025.

The Thai baht’s USD/THB pair jumped 0.8%, while Indonesian rupiah’s USD/IDR pair rose 0.3%.

The South Korean won’s USD/KRW pair inched 0.2% higher, a day ahead of a planned parliamentary vote to impeach country’s President Yoon Suk Yeol over his attempt to impose martial law in the country.

The Japanese yen’s USD/JPY pair rose 0.3% as media reports showed that the Bank of Japan was likely to keep interest rates unchanged next week, in contrast to earlier expectations of a hike.

In other regions, the Singapore dollar’s USD/SGD pair inched slightly higher, while the Australian dollar’s AUD/USD pair was largely unchanged.

The Indian rupee’s USD/INR pair was muted, remaining near an all-time high hit on Thursday.

Source: Investing.com