Most Asian currencies fell slightly on Monday as traders shifted slightly towards the dollar ahead of key U.S. inflation data this week, which is expected to provide further clues on interest rates.
Regional trading volumes were limited due to a Japanese market holiday, which also saw the yen weaken slightly against the US dollar. The pair rose 0.3% to 147.07 yen, retreating further from a stunning rally over the past month.
Expectations of economic readings and central bank meetings across Asia kept traders on edge, while sentiment was also affected by reports that Iran could launch an attack on Israel in the coming days.
Dollar Steady, CPI Data Awaits
Gold and silver saw little movement in Asian trading, and stabilized after recording sharp fluctuations last week.
This week’s focus is on key data, due out on Wednesday, for further clues about the world’s largest economy.
The reading is expected to show some slowdown in inflation through July, a trend that will likely give the Federal Reserve more confidence to start cutting interest rates.
The dollar has been hit hard by fears of a U.S. recession and bets on further interest rate cuts in recent weeks, with traders pricing in a 50 basis point cut in September, Reuters reported.
But some strong labor market data over the past week has helped spur bets that fears of a U.S. recession are overdone.
Chinese Yuan Falls, More Economic Data Ahead
The Chinese yuan fell on Monday, with the pair rising 0.2%.
Although the yuan’s big losses were due to continued support from the People’s Bank of China, doubts about the Chinese economy have mostly kept traders shorting the currency.
Attention this week is focused on China’s industrial production and retail sales data, for further clues about the country’s biggest economic drivers.
Broader Asian currencies fell as traders remained shunning risk-based assets ahead of more signals on the world’s largest economies.
The Indian rupee held near record highs, drawing some support from a somewhat hawkish message from the Reserve Bank of India last week. Indian data is due later on Monday.
The South Korean won rose 0.4%, while the Singapore dollar rose slightly.
The Australian dollar was an exception, with the pair rising 0.2% after a series of hawkish messages from the Reserve Bank of Australia last week.
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