Asian currencies rally as dollar weakens after Fed holds rates steady

Several Asian currencies strengthened on Thursday as the US dollar weakened broadly following the Federal Reserve's decision to hold interest rates steady overnight, with China's yuan, India's rupee, and the Philippine peso all posting gains.

Yuan Touches Six-Week High on Strong PBOC Fixing

China's yuan touched a one-and-a-half-month high of 6.7600 per dollar in morning trade on Thursday, its strongest level since June 17, according to Reuters. The People's Bank of China set the midpoint rate at 6.7892 per dollar prior to market opening, its strongest since February 2023.nst+1

"The yuan strengthened due to the weakening of the dollar index," Nanhua Futures analysts said in a note. The currency has gained 0.4 per cent against the dollar this month and 3.5 per cent this year, supported by robust exports and energy self-sufficiency.nst

Michael Wan, senior currency analyst at MUFG Bank, said volatility in the dollar will continue to weigh on Asian emerging market currencies, adding that the yuan may still outperform driven by a resilient domestic economy.nst

Rupee and Peso Also Advance

India's rupee appreciated 13 paise to 95.63 against the US dollar in early trade on Thursday, supported by positive momentum in domestic equity markets and foreign institutional investor inflows. At the interbank foreign exchange, the rupee opened at 95.59 before settling slightly to 95.63. However, gains were capped by a firm dollar index following the Fed's rate decision.mid-day+1

The Philippine peso surged to a one-month high on Wednesday, closing at PHP 61.41 against the greenback, its best finish since June 30. The rally was driven by improving risk sentiment and a strong showing by the Philippine Stock Exchange index, which climbed 0.77 per cent to 6,353.04. Hawkish signals from Bangko Sentral ng Pilipinas Governor Eli M. Remolona Jr., who said the central bank could consider a larger 50-basis-point rate increase amid lingering inflation risks, also lent support.wealthinsights.metrobank

Geopolitical and Policy Risks Loom

Traders are closely watching escalating Middle East tensions and policy signals from China's Politburo meeting this week for further direction. Crude oil futures were trading around $89.60 per barrel amid resumed hostilities between Iran and the United States. The dollar index stood at 100.92 after the Fed offered no forward guidance on its rate path.newsarenaindia+1