Anticipation of economic readings and central bank meetings from across Asia kept traders on edge
Most Asian currencies weakened marginally on Monday as traders turned slightly biased towards the dollar in anticipation of key U.S. inflation data this week, which is expected to offer more hints on interest rates.
Regional trading volumes were limited due to a Japanese market holiday, which also saw the yen soften marginally against the greenback. The USDJPY pair gained 0.3% to 147.07 yen, retreating further from a stellar rally over the last month.
Anticipation of economic readings and central bank meetings from across Asia kept traders on edge.
The dollar index and dollar index futures both moved little in Asian trade, steadying after logging wild swings last week.
Focus this week is on key CPI data, due on Wednesday, for more cues on the U.S. economy.
The number is expected to show some cooling in inflation through July- a trend that is likely to give the Fed more confidence to begin cutting interest rates.
The dollar was battered by fears of a U.S. recession and bets on increased rate cuts in recent weeks, with traders pricing in the possibility of a 50 bp cut in September, as per CME Fedwatch.
But some strong labour market data through last week helped spur bets that fears of a U.S. recession were overblown.
The Chinese yuan softened on Monday with the USDCNY pair rising 0.2%.
While major losses in the yuan have been stemmed by persistent support from the People’s Bank, scepticism over China’s economy kept traders mostly short on the currency.
Focus this week is on Chinese industrial production and retail sales data, for more cues on the country’s biggest economic engines.
Wider Asian currencies drifted down, as traders remained averse towards risk-driven assets ahead of more cues on the world’s biggest economies.
The Indian rupee’s USDINR pair stayed near record highs, taking some support from a slightly hawkish messaging from the Reserve Bank of India last week. Indian CPI inflation data is due later on Monday.
The South Korean won’s USDKRW pair advanced 0.4%, while the Singapore dollar’s USDSGD pair rose marginally.
The Australian dollar was an exception, with the AUDUSD pair gaining 0.2% after a slew of hawkish messages from the Reserve Bank of Australia last week.
