Nov 22 (Reuters) – Asian currencies firmed on Wednesday on the back of a weakened U.S. dollar after Federal Reserve chair Janet stuck by her prediction that U.S. inflation would rebound but added she was “very uncertain” of it happening. “She mentioned quite specifically that inflation expectations could be drifting lower, which is something she has not spoken about before,” said Nizam Idris, head of strategy, fixed income and currencies at Macquarie Bank.
“Basically, she has cast some doubt over the Fed’s previous view that the low inflation that we see currently is transitory in nature.” Idris said.
“So, both those twists in her opinions in my view are dovish and therefore I think the dollar has weakened from those comments.”
The dollar index , which measures the greenback against a basket of six major currencies, fell from a one-week high of 94.165 overnight. Among Asian currencies, the Malaysian ringgit strengthened over 0.4 percent after central bank Governor Muhammad Ibrahim said the currency was “far from reflecting its fair value”, signalling a desire for the exchange rate to build on its recovery from a sharp selloff last year.
“BNM (Bank Negara Malaysia) would prefer a stronger ringgit to take the edge off rising prices given their latest forecast suggesting inflation wll be at the upper end of the forecast range,” Stephen Innes, head of trading APAC at Oanda, wrote in a note on Wednesday.
Malaysia’s annual inflation rate is likely to moderate to 4 percent for October from 4.3 percent in September, according to a Reuters poll