Asia FX muted as dollar weakens; euro steady as leftists lead French elections By Investing.com

Most Asian currencies were little moved on Monday, with the dollar suffering sharp losses amid growing expectations of interest rate cuts, while the Japanese yen held firm on data showing a recovery in average wages.

Elsewhere, European stocks steadied after French election results showed a left-wing coalition won the most parliamentary seats in a snap election, with President Emmanuel Macron’s party coming in second and Marine Le Pen’s far-right party in third.

Sentiment towards Asian currencies remained tense amid concerns over a potential trade war between China and the European Union. But most regional currencies were sitting on some gains after the dollar fell sharply over the past week amid growing optimism about a U.S. interest rate cut.

Gold and silver futures settled at their lowest levels in a month on Monday. The focus this week is on two-day testimony on the one hand, as well as key inflation data.

Japanese Yen Rises on Strong Wages Data, USD/JPY Drops

The Japanese yen was among the biggest beneficiaries of the dollar’s weakness, pulling away from its weakest levels in 38 years after data pointed to some strengthening in the economy.

The yen fell 0.2 percent to remain below the 162 level hit last week. Data showed Japan’s economy grew at its fastest pace in more than 30 years in May, as huge wage increases won by labor unions earlier this year took effect.

Higher wages offer brighter prospects for consumption and inflation, and could eventually give the Bank of Japan more room to raise interest rates. The Bank of Japan has forecast higher inflation in the coming years on the back of higher wages.

However, the focus remained on any potential government intervention, as the USD/JPY pair remained above the 160 level.

Chinese Yuan Fragile as Trade Tensions Persist

The Chinese yuan was little changed on Monday, hovering just below a seven-month high as sentiment towards China remained weak.

The European Union on Friday imposed stiff tariffs on Chinese electric car imports, despite Beijing’s objections, and Chinese officials have raised the prospect of a trade war.

Such a move bodes ill for China, especially as the country struggles to sustain a slow economic recovery. The yuan has also been hit hard by growing doubts about the Chinese economy, following a series of mixed data.

This week focuses on China and more signals about the economy.

Broader Asian currencies remained rangebound. The Australian dollar rose 0.1% after data showed activity in the country slowed unexpectedly in May.

The Singapore Dollar and South Korean Won pair did not see any significant movements.

The Indian Rupee pair declined slightly, but remained around the mid-83 level.