US dollar held firm near its highest levels in almost two months during Thursday trading, supported by several key factors, led by rising geopolitical tensions in the Middle East and continued expectations that US monetary policy will remain tight for longer.
Meanwhile, Asian currencies managed to recover slightly after a strong selloff in previous session, moving within narrow ranges as caution continued to dominate market sentiment.
Announcement of a ceasefire agreement between Israel and Lebanon helped ease pressure on regional currencies and gave markets some stability. However, recent military developments linked to Iran and United States kept risk appetite under control.
Events around Gulf region and Strait of Hormuz also supported demand for US dollar as a safe haven during periods of uncertainty.
In Asian currency markets, most currencies moved within limited ranges, while Japanese yen continued trading near 160 against dollar. Markets view this level as sensitive and potentially capable of triggering official intervention from Japanese authorities if pressure on currency continues.
This came alongside comments from Bank of Japan Governor Kazuo Ueda, who pointed to possible consideration of further rate hikes if inflation risks become clearer in coming period.
On US side, recent economic data strengthened dollar after showing continued resilience in labor market and steady momentum in services sector. Prices index in services sector also showed a notable rise, confirming that inflation pressures have not eased enough to support expectations of quick rate cuts.
As a result, markets reduced bets on any near term monetary easing by Federal Reserve.
Attention is now turning to upcoming US nonfarm payrolls report, which is expected to play a key role in reshaping investor expectations for US monetary policy path over coming months, especially as markets remain highly sensitive to any new signals related to inflation or labor market strength.
Asian markets came under selling pressure during Thursday trading, as technology and chip stocks declined after a strong rally that had pushed them to elevated levels in recent days. Meanwhile, geopolitical developments tied to US-Iran conflict continued to push investors toward reducing risk exposure in portfolios.
Main pressure came from semiconductor sector after Broadcom’s quarterly results failed to meet elevated market expectations, prompting investors to reassess valuations across sector.
This quickly weighed on chip stocks in Asia, especially in South Korea and Japan, where major companies such as Samsung and SK Hynix saw notable selling after recent record gains.
In South Korea, chip sector was main driver of decline, amid a broad profit taking wave in companies linked to artificial intelligence and semiconductors.
At same time, Chinese stocks managed to limit losses thanks to continued optimism over development of domestic AI sector, alongside expectations of major index reshuffling that may give Chinese chip companies greater weight in market.
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