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Asian currencies firm as dollar drops on Fed rate pause bets

Asian currencies

The Chinese yuan soared 0.5 per cent, the Australian dollar jumped 0.6 per cent, the South Korean won climbed 0.6 per cent, and the Japanese yen added 0.5 per cent

Most Asian currencies firmed sharply on Monday, tracking extended declines in the dollar amid increasing speculations that the Fed was done hiking interest rates, while promises of more Chinese stimulus measures also aided sentiment.

The Chinese yuan soared 0.5 per cent to its highest level against the dollar since early-August. The biggest point of support for the yuan was a substantially stronger-than-expected daily midpoint fix by the People’s Bank of China (PBOC).

The PBOC held its benchmark loan prime rate near record lows on Monday, while also injecting around 80 billion yuan of liquidity into the economy.

Separately, Chinese officials vowed more policy support for the country’s troubled property sector- a move that helped shore up confidence over one of China’s biggest industries. Troubles in the property sector have been a major headwind to China over the past three years.

Optimism over China saw the Australian dollar climb 0.6 per cent, with attention also turning to the minutes of Reserve Bank of Australia’s (RBA) November meeting, due on Tuesday. The RBA had hiked interest rates by 25 bps, but offered somewhat dovish cues on future rate hikes.

The South Korean won climbed 0.6 per cent, while the Indian rupee saw limited strength as oil prices bounced back. Wider Asian currencies were largely bolstered by weakness in the dollar, which dipped to a more than two-month low.

The Japanese yen was among the biggest beneficiaries of dollar weakness, adding 0.5 per cent and strengthening below the 150 level to the dollar for the first time in around three weeks.

The yen had been battered by dovish signals from the BoJ earlier this month, which indicated that interest rates were likely to remain ultra-low for the time being.

But with markets now growing less fearful of more U.S. rate hikes, the yen found some respite.

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