© Reuters.
Investing.com – Most Asian currencies were steady on Tuesday, supported by a mix of dollar weakness and promises of more Chinese-backed stimulus, with focus now turning to the upcoming Federal Reserve meeting.
Weak US data released overnight prompted more bets that the Federal Reserve will have limited scope to continue raising interest rates, ahead of the start of the two-day meeting on Tuesday.
The dollar fell in Asian trade, as the recovery from 15-month lows ran out of steam. Both fell about 0.1% each on Tuesday.
The Chinese Yuan rose amid stimulus talk and the People’s Bank of China support
The index jumped 0.4% on Tuesday, rebounding sharply from the 7.2 level it hit earlier this week. The currency was helped to repair a significantly stronger daily midpoint by the People’s Bank of China.
Media reports also indicated that Chinese state banks were selling dollars again to support the yuan.
Sentiment towards China rose after officials from the Politburo – the Communist Party’s highest decision-making body – pledged to ramp up stimulus efforts to support an economic recovery.
The authority also noted new efforts to stabilize the yuan, after the currency fell more than 4% against the dollar this year.
But while the stimulus measures bode well for the Chinese economy, increased liquidity could herald more pressure on the yuan, especially if the People’s Bank of China cuts interest rates further.
Most other Asian currencies rose on Tuesday. It rose 0.1% before a meeting later in the week, while it was flat ahead of a meeting later in the day.
The index rose 0.3% while it rose 0.1% to a two-month high. It rose 0.1% as data showed the country grew more than expected in the second quarter.
The Fed hiked its rate, and the outlook is uncertain
The Fed is widely expected to close its two-day meeting on Wednesday. While the markets seem to have largely priced in the rally, traders remained unsure what the Fed might be signaling.
US inflation remains well above the central bank’s target range, which could see the Fed stick to its plan for at least one increase this year after Wednesday’s move.
But it showed that markets are pricing in the chance that the Bank will keep interest rates steady for the rest of the year.
