Asian currencies declined on Friday as economic and geopolitical risks overshadowed the market’s optimism about potential interest-rate cuts. The disappointment stemmed from China’s Third Plenum, which failed to convince investors of a renewed growth impetus. Today’s negative price action in Asian equities is more attributed to concerns over new US restrictions on the semiconductor sector and the relatively underwhelming communiqué from the Third Plenum than the “twists and turns of the US presidential race.
US futures edged higher despite the selloff in Asian equities. Asian currencies slipped against the greenback as a rout in chip stocks continued in Asia, driven by fears of fresh US restrictions on sales to China. Treasury yields remained steady after the 10-year yields rose four basis points to 4.20% on Thursday. The yen stabilized against the dollar following a decline on Thursday, as Japan’s June inflation data came in softer than expected. An index of the dollar held onto gains from the prior session.
US initial jobless claims data released on Thursday showed the largest increase since early May, indicating a cooling labor market that supports expectations for imminent Federal Reserve rate cuts. The central bank is nearing a decision to reduce borrowing costs in September, buoyed by growing confidence that price stability is within reach. Investors are also assessing signs that President Joe Biden’s hold on the Democratic presidential nomination may be weakening, as he contends with increasingly public warnings from top lawmakers within his party.
In commodities, oil prices edged lower amid concerns that a slowdown in Chinese growth could jeopardize consumption. Gold prices also fell, with speculation that its recent rally to an all-time high earlier this week may have been overextended. The intersection of these economic indicators and geopolitical developments continues to shape market sentiment, highlighting the complex dynamics at play in the global economy.