HG MARKETS:

Asian currencies edged higheron Friday as the U.S. dollar weakened, driven by rising expectations of a Federal Reserve rate cut in December. This comes despite recent data showing resilience in the U.S. economy and sticky inflation. Investors are now pricing in a 67% probability of a 25 basis point cut at the upcoming Fed meeting, according to the CME FedWatch Tool. The dollar index declined 0.3% during Asian trade, marking a weekly loss of nearly 1.6%.

The Japanese yen surged to its strongest level against the dollar in over a month, buoyed by robust inflation data from Tokyo. Core consumer prices in the Japanese capital rose more than expected in November, indicating mounting inflationary pressure. This has increased market bets on a potential rate hike by the Bank of Japan in December. The USD/JPY pair dropped nearly 1% on Friday and recorded a weekly decline of about 3%. The yen’s rally reflects growing confidence in Japan’s move toward tightening monetary policy, which has long been ultra-loose.

The Australian dollar also gained momentum, rising 0.3% against the dollar during Friday’s trading. However, it ended November with a 1% loss due to global economic uncertainties and weaker commodity demand. Investors remain cautious about Australia’s outlook, especially as the Reserve Bank of Australia adopts a data-dependent approach to its monetary policy.

Meanwhile, the euro and the British pound also posted gains against the dollar. The euro was supported by hawkish comments from European Central Bank policymakers, who signaled that rates could remain elevated for longer to tackle inflation. The EUR/USD pair rose 0.4% on Friday, trimming its monthly losses. The British pound followed a similar trajectory, rising 0.3% as markets digested the Bank of England’s recent signals on future rate hikes.

The trading day was marked by thin volumes as U.S. markets remained closed for the Thanksgiving holiday, leaving Asian and European markets to set the tone. As November concludes, attention shifts to December, with key central bank meetings likely to drive currency markets. Traders are watching the Federal Reserve, Bank of Japan, and European Central Bank closely for guidance on interest rate trajectories.

In the coming weeks, global trade concerns and geopolitical developments, including U.S. fiscal policies under a Donald Trump presidency, are expected to influence the performance of currencies traded on PMEX. These developments will likely shape investor sentiment heading into 2024.