© Reuters
Investing.com – Most Asian currencies moved slightly on Friday, while the dollar held on to recent gains as markets were falling ahead of a series of central bank meetings this week, most notably the Federal Reserve.
Signs of more policy support in China did little to help the weak sentiment, with uncertainty about the Fed’s plans for future interest rate action keeping investors shy of any risk-driven assets.
The central bank is still widely expected on Wednesday. But whether it will signal more rate hikes this year remains to be seen, given US inflation is still trending above the bank’s target annual range.
The dollar has stabilized in Asian trade, hovering around the 101 mark. Both instruments are now trading above the 15-month low hit earlier in July.
The focus this week is also on Thursday’s meeting, when the Bank is set to raise interest rates by 25 basis points.
Japanese yen companies, the Bank of Japan in focus
It rose 0.3% on Monday, recovering from huge losses last week as Japan’s currency minister acknowledged that inflation was more steady than expected.
But despite the trend, the Bank of Japan gave scant indications that it plans to tighten its ultra-loose policy in the near term, broad-based yield curve control measures on Friday. The Japanese government also said on Monday that the rate of inflation is likely to moderate further this year.
The dovish outlook from the Bank of Japan is putting more downward pressure on the yen, as the Fed’s rate hike this week is set to widen the gap between domestic and US interest rates.
The rate hike is also expected to weigh on most other Asian currencies, as the gap between risky and low-risk debt narrows.
It fell 0.1%, while it rose 0.3%. It was steady, while gradually rising in anticipation of more stimulus measures in China.
The Chinese Yuan weakened, and more stimulus failed to cheer
It fell 0.1%, with little support from the strong midpoint peg by the People’s Bank of China.
The markets also appeared to cloud Beijing’s pledge to take more measures to support private investment in the country. A notice issued on Monday said the government plans to allow private companies to operate in sectors including transportation, water and other infrastructure, and will also issue policies to facilitate investment in the country.
Chinese officials also pledged to step up liquidity measures after economic growth slowed sharply in the second quarter. But any increases in liquidity are negative for the yuan.