- Asian currencies, including the yen, South Korean won, and Singapore dollar, have surged to their highest levels in months, driven by a risk-on market sentiment and expectations around upcoming central bank decisions in the region.
- The upcoming Jackson Hole symposium is seen as a crucial event, with Fed Chair Powell expected to adopt a more hawkish stance, which could strengthen the U.S. dollar and potentially reverse the recent gains in Asian currencies.
Investors will be watching a series of key Asian central bank decisions and inflation reports this week, as regional currencies rally to annual highs.
The Bank of Korea is set to announce its rate decision on Thursday, followed by inflation data from Japan and Singapore on Friday.
The U.S. dollar’s slide resumed from last week, with markets embracing a risk-on sentiment. The yen climbed past 146 per dollar, marking its strongest level in nearly two weeks. Further selling could open up the 140.450 mark.
However, Bank of America sees the upcoming Jackson Hole symposium as a game-changer, with Fed Chair Powell possibly striking a more hawkish tone, which could strengthen the dollar. This could make the Asian currencies trades interesting considering the risk-on sentiment that has helped push them to multi-month and yearly highs.
The South Korean won has surged to a five-month high, as the central bank is unlikely to cut interest rates this week. The BOK is expected to maintain its policy rate at 3.50%.
The Singapore dollar has also extended its gains, reaching an 18-month high.
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