Waller’s Dovish Signal Weakens Dollar as Asian Currencies Reach New Highs

A dovish signal from Federal Reserve Governor Christopher Waller sent the dollar lower and pushed several Asian currencies to new trading-period highs. U.S. stocks rose across the board on Thursday, while Treasury yields declined and the dollar index fell below 99.

Taiwan’s benchmark share index regained the 46,000-point level in early trading. The Taiwan dollar also strengthened, briefly moving above NT$31.7 per U.S. dollar before ending the morning at NT$31.732, up NT$0.023. Trading volume at the Taipei Foreign Exchange Brokerage was $880 million.

Waller said he would be inclined to support keeping rates unchanged in September if data released over the next two weeks continued to show cooling inflation. He left open the possibility of supporting a rate increase if August inflation accelerated again. His comments led markets to scale back expectations of a September hike.

The yen, yuan and won all reached new highs for the current trading period. The yen, which had fallen below 160 per dollar, strengthened after Bank of Japan Governor Kazuo Ueda signaled possible rate increases. It rose above 156 per dollar in morning trading, reaching 155.296, its strongest level in nearly a month. Offshore yuan rose to 6.7136 per dollar, its highest level in more than three years.

The Taiwan dollar had weakened the previous day as foreign investors sold local assets and funds flowed abroad. It recovered as Taiwanese stocks stabilized and the dollar weakened. Attention shifted to the U.S. August nonfarm payrolls report, after weaker-than-expected private employment data renewed concerns about a cooling labor market.

“

If the data released over the next two weeks continues to show inflation cooling, I would be inclined to support keeping rates unchanged in September. However, if August inflation rises again, I could still support a rate increase.