Most Asian currencies fell slightly on Tuesday as the dollar recovered from recent losses ahead of a series of interest rate signals, while the Japanese yen weakened further to territory not seen in 38 years.
Regional currencies saw little support even as traders priced in increased chances of a Federal Reserve rate cut in September. Expectations of further signals from the Fed and a firmer U.S. labor market kept appetite for risk-based assets in check.
Japanese Yen Falls, USD/JPY Rises as Focus on Intervention
The Japanese yen continued to lag its Asian counterparts, with the pair, which measures the number of yen needed to buy one dollar, rising 0.1% to 161.64 yen. The pair hovered around its highest level since 1986.
The yen’s continued weakness has sparked ongoing speculation about possible government intervention in currency markets. Japanese ministers have said they remain vigilant on currency market movements, although the dollar/yen pair has been trading comfortably above the 160-yen level that last prompted intervention in May.
Traders speculated that the government might wait for lower market volumes during the July 4 holiday to intervene.
Dollar steady, Powell, payrolls, Fed minutes awaited
Gold prices steadied in Asian trading after rebounding from recent losses on Monday, with more signals on the Federal Reserve and U.S. interest rates due this week.
The ECB president is due to address a bank conference on Tuesday, while the rest of the bank’s members are due to speak on Wednesday.
Key data for June is due on Friday and should provide more insight into the labor market, which is also a key consideration for the Fed when cutting interest rates.
The dollar weakened last week as traders raised bets on a 25 basis point rate cut in September. But several Fed officials have stressed that the central bank will need more confidence in tamping down inflation before cutting rates.
Australian dollar falls after RBA minutes
The Australian dollar fell 0.4% on Tuesday after the latest Reserve Bank of Australia meeting offered no clear signals on whether to raise interest rates.
Although the minutes of the meeting showed that policymakers had considered raising interest rates in the face of rising inflation, they ultimately settled on keeping rates steady.
According to analysts at ANZ, this “does not constitute conclusive evidence… that raising interest rates in August is the key issue for the RBA”, and they expect the bank to keep rates on hold until cutting them in February.
But UBS analysts said any further signs of stabilising inflation would likely call for a rate hike in August, which would boost inflation.
Broader Asian currencies were broadly weaker. The Chinese yuan held at a seven-month high, while the Singapore dollar edged up slightly. The South Korean won rose 0.5% after data showed a slower-than-expected June.
The Indian Rupee pair fluctuated around the mid-83 level, remaining close to its recent record highs.