Investing.com — Most Asian currencies fell on Monday as the dollar stabilized from Friday's decline after weaker-than-expected jobs data led markets to increase bets on interest rate cuts by the Federal Reserve.
The Japanese yen was the worst performer in Asia, as it reversed course after clear government intervention last week that led to the currency rebounding from its lowest levels in 34 years.
Most regional currencies also made strong gains since Friday, following the payrolls reading and a corresponding decline in the dollar. But the dollar found its footing on Monday.
The Japanese yen reverses some gains, and the US dollar rises against the Japanese yen
The Japanese yen pair rose 0.6% on Monday, although trading volumes in the pair slowed due to a market holiday in Japan.
The pair, which is inversely linked to the strength of the yen, fell from its highest level in 34 years at more than 160 yen last week amid signs of repeated government intervention in currency markets.
But since the fundamental factors behind the yen's weakness – most notably the large gap between US and domestic interest rates – remain in place, bets against the yen continue.
USDJPY was now on the verge of breaking above the 154 level, with traders also questioning the extent to which Tokyo can continue to intervene in the markets.
The Australian dollar is strong, and AUDUSD rises ahead of a hawkish RBA
The Australian dollar rose 0.1% on Monday, approaching two-month highs as traders traded on Tuesday.
While the Reserve Bank of Australia is expected to keep interest rates unchanged, it is also expected to strike a chord after a stronger-than-expected inflation reading in the first quarter.
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Steady inflation gives the Reserve Bank of Australia more momentum to keep interest rates high for longer, with some analysts suggesting the bank may raise interest rates further.
The dollar stabilized after the decline caused by payrolls and focus on interest rate cuts
Both rose 0.1% in Asian trading after falling 0.8% last week. Losses in the US dollar came with a weaker than expected data reading for April.
The data reinforced bets that a cold labor market will give the Federal Reserve more momentum to start cutting interest rates. Traders were ramping up their bets for a 25 basis point cut in September.
The weak payrolls data also puts upcoming addresses by a series of key Fed officials this week squarely into focus.
Broader Asian currencies fell after achieving some strength against the dollar last week. But the possibility that US interest rates will remain high in the near term has kept most regional currencies trading negative this year.
The Chinese yuan pair fell 0.4% on Monday in catch-up trade, with local yuan trading resuming after a long weekend.
The Singapore dollar pair rose 0.2%, while the Indian rupee pair rose 0.1% and returned to record levels.
