Most Asian currencies moved in a flat-to-low range on Tuesday as speculation about a Donald Trump presidency helped lift the dollar, outweighing growing bets on interest rate cuts.
The Japanese yen underperformed its peers, pressured by a stronger dollar, prompting continued warnings from authorities about intervening in the currency market.
Sentiment towards regional markets also remained negative after weak data from China, which pointed to slowing growth in Asia’s largest economy.
Dollar Continues to Recover Amid Speculation Over Trump Presidency
Gold and silver prices rose 0.1% in Asian trading, continuing their overnight recovery from three-month lows.
Speculation has grown that Trump could win a second term after the assassination attempt on the former president over the weekend, which is believed to have greatly boosted his popularity.
A second Trump term would be positive for the dollar, as he is widely expected to pursue more protectionist trade policies, which could lead to higher inflation. Such a scenario could keep interest rates relatively high in the long run.
However, the dollar has been suffering from sharp losses from last week as some weak inflation figures and dovish signals from the Federal Reserve have increased bets that the central bank will cut interest rates by at least 25 basis points in September. This perception has limited any significant gains for the dollar.
All eyes were on Tuesday’s upcoming data, which is expected to provide further indications about the slowdown in the US economy.
Japanese Yen Weakens, Intervention Threats Persist
The Japanese yen fell on Tuesday, giving up more of its recent gains against the dollar. The pair rose 0.4% to 158.64 yen, having fallen from around 162 yen last week.
The pair’s sharp drop came amid a sharp weakness in the dollar last week. But the drop also raised speculation about whether the Japanese government intervened in the currency markets to support the yen.
Japanese officials renewed their warnings about intervention on Tuesday, stressing that they are ready to take all possible measures to stop excessive volatility in currency markets.
China’s Yuan Fragile Amid Economic Woes, Trump Speculation
The Chinese yuan fell on Tuesday, with the pair extending gains from Monday and returning to an eight-month high.
The yuan came under heavy pressure after data showed that China’s economy grew less than expected in the second quarter.
But speculation about Trump’s presidency has also weighed on the yuan, as he has maintained a largely negative tone toward Beijing during his first term. Trump has imposed steep tariffs on many Chinese goods, sparking a trade war with China.
Broader Asian currencies moved in a range from flat to down. The South Korean won and the Singapore dollar rose about 0.1% each.
The Australian dollar pair fell by 0.2%, while the Indian rupee pair remained close to record highs.