Key highlights:
- The US dollar index fell 0.12% to 101.69, but all Asian currencies didn’t move the same way. Some lost value compared to the US dollar.
- The Australian dollar slipped 0.2% to $0.6988, even after the Reserve Bank of Australia raised its key interest rate by 0.25 percentage points to 4.85%. Investors now think there might not be many more rate hikes ahead.
- China’s offshore yuan dropped 0.37% to 6.6710 per dollar after the country’s central bank announced it would raise its foreign-exchange reserve requirement ratio from 4% to 6%.
- The South Korean won rose 0.5% to 1,339.37 per dollar, helped by a big jump in exports, especially for computer chips, which were up 259.4% compared to last year.
Asian currencies moved in different ways on Tuesday as investors reacted to policy decisions, trade news, and inflation numbers. The US dollar was a bit weaker, but that didn’t lift every Asian currency. The Australian dollar, Chinese yuan, Taiwan dollar, Philippine peso, and Indonesian rupiah all came under pressure. The South Korean won, on the other hand, gained value. India’s rupee was mostly the same.
These ups and downs had more to do with what was going on in each country than with any big regional trend. In Australia, the central bank raised interest rates again, but the Australian dollar still declined because investors think rate hikes could be ending soon. In China, a move by the central bank hurt the yuan. South Korea’s strong export numbers helped its won. Investors kept an eye on upcoming US economic news and decisions by other Asian central banks.
Australian Dollar Declines Despite RBA’s Latest Rate Increase
The Australian dollar weakened on Tuesday, even though the Reserve Bank of Australia raised interest rates as expected. The new rate, 4.85%, is the highest it’s been in 18 years, and it’s the fifth hike this year. Still, the Australian dollar fell 0.2% to $0.6988, and at one point it was down 0.4% after the announcement.
One reason for the drop was that not everyone on the central bank board agreed on the hike. Six out of nine members voted to raise rates, but three wanted to keep them steady. This split vote made investors think rate hikes could soon end. Many expected a more unanimous decision.
Marcel Thieliant, an economist at Capital Economics, pointed out that the central bank changed how it described financial conditions. Now it says conditions are restrictive instead of just somewhat restrictive, which means it thinks its current settings are sufficiently tight. Capital Economics now expects no more rate hikes and thinks the next move will be a rate cut, but not until late 2027.
Inflation is still a concern. The central bank now expects trimmed mean inflation to be 3.5% by the middle of 2027, up from its earlier forecast of 3.0%. Higher fuel and commodity costs (partly because of problems in the Middle East) and tighter supply in Australia caused the higher outlook. So, even if the bank feels good about its current decisions, inflation risks aren’t gone.
The US dollar also didn’t get much of a boost, even though investors were playing it safe. People are waiting for the US midterm elections and Friday’s jobs report. DBS predicts US jobs rose by 100,000 in October, up from 29,000 before. The new jobs numbers could change what investors think the US central bank will do next about interest rates.
Yuan Weakens After PBOC Policy Change While Won Gains on Strong Exports
The Chinese yuan weakened after China’s central bank said it would increase banks’ foreign-exchange reserve requirement ratio by two points, from 4% to 6%. This rule takes effect on November 15. It will take about $24 billion out of the financial system.
The goal is to slow the yuan’s rise against the US dollar. This year, the yuan is up more than 5% compared to the dollar, thanks to strong trade and company currency exchanges. After the news, the offshore yuan fell 0.37% to 6.6710 per dollar; the onshore yuan dropped 0.38% to 6.6731 per dollar.
The South Korean won did better, rising 0.5% to 1,339.37 per dollar after strong trade numbers for October. South Korea’s exports jumped 93.7% compared to last year, reaching a record $115.28 billion. Chip exports were up huge, 259.4% more than a year before.
The won already did well in the third quarter, going up about 13% against the dollar, its best jump since late 1998. But inflation in South Korea is still above target. Inflation dropped a bit, to 2.8% from 2.9%, but it’s still over the central bank’s 2% goal.
The Taiwan dollar fell 0.6% against the US dollar. The Philippine peso and Indonesian rupiah fell 0.34% and 0.4%. The Singapore dollar and Malaysian ringgit also weakened. India’s rupee was basically flat at 94.918 per dollar. Japan’s yen edged up to 157.80 per dollar in quieter trading due to a local holiday. The New Zealand dollar was up 0.1% to $0.5629. The euro and British pound gained 0.13% and 0.1%.
Now, investors are waiting for more news from Asia. Bank Negara Malaysia will announce its interest rate decision on Thursday, and DBS expects no change, the rate should stay at 2.75%. People are also watching inflation numbers for October from Taiwan, Thailand, and the Philippines for hints about price trends in the region.
