By Ambar Warrick
Investing.com -- Most Asian currencies strengthened in thin trade on Monday, while the dollar weakened further amid growing bets that the Chinese economy will bounce back this year, with focus also turning to key U.S. data due this week.
Regional trading volumes were limited with most markets closed for the Lunar New Year. But markets are betting on a major boost to the Chinese economy from the week-long holiday, after the country relaxed most anti-COVID measures and reopened its borders.
While the central bank maintained its ultra-accommodative policy earlier this week, the yen has been on a tear since the BOJ tweaked its yield curve control measures in December. The minutes of the central bank’s December meeting showed that government officials had requested a brief adjournment of the meeting to contact their respective ministries, highlighting the importance of the BOJ’s policy shift.
Markets are now betting that rising inflation will eventually spur the central bank into tightening policy, which has greatly boosted the yen in recent weeks.
Focus this week is squarely on U.S. fourth-quarter GDP data due on Thursday. The reading is expected to show a further easing in growth from the prior quarter, heralding a potential slowdown in the world’s largest economy as the effects of tight monetary conditions begin to be felt.
While a U.S. recession bodes poorly for Asian currencies, most regional units also benefited from growing bets that thewill slow its pace of rate hikes to prevent further economic destruction.
The dollar and Treasury yields retreated on that notion.
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