The forex market witnessed a retreat in the behavior of the Asian currencies in the Friday trading session.
The particular session saw the trading prices of most of the Asian currencies moving in a negative direction. Most of them did not dare rise against the trading price of the US dollar in the latest session.
Strong CPI Inflation Data
According to the economists, the demise was recorded as the US CPI inflation data came out to be stronger than expected.
The CPI data was more than enough to excite the US investors enough to form strong rallies in favor of the dollar. They started to pour in huge stacks of investments in favor of the dollar.
This eventually pumped the trading price of the dollar in the latest trading session against the major currencies.
Although the dollar price rose significantly against the major currencies, it was the Asian currencies that saw the biggest pull against the dollar.
As the CPI inflation data came out to be stronger than the expectations of the economists, it caused a push in the Treasury Yields in the short term.
With the CPI inflation data coming in stronger, it was expected that the Feds would continue hiking the interest rates going forward.
As the interest rates keep on rising, the value of the dollar would continue surging in future trading sessions. For now, the decision falls on the Federal Reserve, as they are to confirm whether the interest rates will be increased or not.
Whether it is interest rate hikes or the Feds deciding to stick with the same rate hikes going forward, it is going to make the dollar stronger.
The dollar price will continue growing firmer in the near future and other currencies will continue losing their momentum.
Decline Faced by Asian Currencies
When it comes to Asian currencies, it is the Malaysian ringgit that has witnessed the lowest pull. The data shows that the value of the ringgit has pulled by 0.9% against the dollar.
The value of the South Korean won has recorded a similar pull as the ringgit as well. Its value has also recorded a 0.9% pull against the won.
As for the Thai baht, its value has recorded a 0.6% pull while the Chinese yuan has recorded a 0.3% dip against the greenback.
The value of the Indian rupee (INR) has also dipped 0.1% against the dollar value.
Even the US dollar index (DXY) has recorded a strong push against the six major currencies. Even the dollar index futures has recorded a significant push against the Asian trading entities.
Treasury Yields Caused a Huge Impact
The situation turned extremely complicated for the Asian markets right after the latest information was shared pertaining to the short-term Treasury yields.
The latest data showed that the 5-year, 2-year, and 1-year yields recorded major surges. These short-term yields reportedly experienced surges between 1.4% and 2.5%.
This happened because the US CPI data made it clear that it was very high in the month of January.
With the data being released recently, it is expected that the Feds will become even more hawkish against the interest rates.
This would mean that the trading price of the dollar would continue experiencing major spikes against the major currencies.
Its value will continue gaining more momentum and it will become firmer against all major currencies, including the Asian players.
Comments by John Williams
The NY Federal Reserve President has also favored the continuation of interest rate hikes in the upcoming months.
He has predicted that given the current economic circumstances, they will continue increasing the interest rates. If the rates keep on rising, then they would cross the peak level of 5.1% that they had set initially.
As per Williams, the country will continue battling the rise in the inflation rates by increasing the interest rates. This would continue making things more favorable for the dollar in the international market.