Asian Forex Markets Face Risk Sentiment Shift Amid Concerns Over China, Trump’s Policies
Asian forex markets witnessed a downturn in risk sentiment as investors steered away from higher-yielding assets. Concerns over China’s economic outlook and potential protectionist measures under US President-elect Donald Trump weighed heavily on market confidence.
In response to the ongoing economic strain, sources familiar with the matter told Bloomberg News that Chinese regulators are contemplating reducing deed tax for homebuyers from up to 3% to a minimum of 1%. However, this measure did little to lift trader sentiment, with investors remaining cautious.
Asian Stock Markets Drop on Semiconductor Weakness and US-China Tensions
Asian stock indices, initially showing gains, reversed course as investor attention focused on regional tensions. Semiconductor stocks led the decline after a Reuters report indicated that the US asked Taiwan Semiconductor Manufacturing Co. to halt shipments of advanced AI chips to Chinese customers. The impact was immediate, with Asian stocks giving up early gains and moving into negative territory.
US Dollar (USD) Strengthens Post-Election, Supported by Fed Rate Expectations
The US Dollar continues to show strength following Donald Trump’s election victory. “Trump trades” have reinforced USD gains, and lowered expectations for a December Fed rate cut are further supporting the currency’s momentum. Market predictions for a potential Fed rate cut on December 18 have decreased from 85% to 65%, according to CME Group’s FedWatch Tool, as the prospect of inflationary tariffs and restrictive immigration policies could dampen economic growth.
Key Forex Pair Movements: USD/JPY, AUD/USD, NZD/USD, EUR/USD, GBP/USD, and USD/CAD
USD/JPY: The pair remains stable above 153.50 after fluctuations between 154.00 and 153.40. Continued strength in the US Dollar, coupled with uncertainty over potential Bank of Japan rate hikes, has provided support.
AUD/USD: Trading around 0.6550, the Australian Dollar struggles amid weak Australian consumer confidence data, Chinese economic concerns, declining commodity prices, and USD strength.
NZD/USD: New Zealand Dollar is trading lower around 0.5955, closely mirroring the AUD’s weakness.
EUR/USD: The Euro continues its downtrend, nearing 1.0600 in early European trading. German political risks and expectations of a dovish European Central Bank stance weigh on the Euro. Upcoming ECB speeches and German economic sentiment data will be critical for fresh trading cues.
GBP/USD: The British Pound extends its decline toward 1.2800 as markets await UK labor market data for potential support.
USD/CAD: The Canadian Dollar weakens to around 1.3950, as USD demand rises amid falling crude oil prices. WTI crude is down 0.50%, trading under $68 per barrel.
Gold Drops on Rate Outlook as Fed Policymakers Awaited
Gold prices have fallen for three consecutive days, testing two-month lows above $2,600. Investors are closely watching Fed policymakers’ speeches for insights into future rate adjustments, as uncertainty about rate cuts weighs on precious metals.
