Most Asian currencies were little changed in thin holiday trade on Monday, while the dollar fell as markets awaited a Federal Reserve meeting where the central bank is likely to cut interest rates.
Regional trading volumes were thin due to holidays in markets in Japan, China and South Korea. But the Japanese yen rose sharply to its highest in more than eight months ahead of a Bank of Japan meeting later this week.
Dollar falls amid speculation of Fed rate cut
Gold and silver prices fell 0.3% in Asian trading, extending a recent losing streak as markets brace for a possible interest rate cut this week.
The Federal Reserve cut interest rates broadly at the conclusion of its monetary policy meeting, although markets are divided over how much the central bank will cut rates.
The data showed that traders are pricing in a 50% chance of a 50 basis point rate cut and a 50% chance of a 25 basis point rate cut.
But despite uncertainty over the size of the cut, the central bank is widely expected to begin an easing cycle with its September meeting, with analysts expecting rates to be cut by at least 100 basis points by the end of 2024.
Japanese yen at highest level in more than 8 months, Bank of Japan awaits its decision
The Japanese yen was the best performer among Asian currencies, with the pair falling 0.6% to 140.04 yen – its lowest since early January. The pair briefly dipped below 140 yen for the first time since 2023.
Part of the yen’s move was driven by lower trading volumes in local markets. But traders also bought the yen ahead of a central bank meeting on Friday where the central bank is expected to deliver a hawkish outlook on interest rates.
Japanese data is also expected to be stronger on Friday, giving the Bank of Japan more impetus to raise interest rates.
The yen has been on a strong rally since last week following a series of hawkish comments from Bank of Japan officials, which signaled a move towards higher interest rates.
Broader Asian currencies were little moved in thin holiday trade. The Australian dollar was an exception, rising 0.4%. The pair is often seen as a barometer of global risk appetite.
The Singapore dollar pair fell by 0.2%, while the Indian rupee pair fell further below the 84 rupee level.
The Chinese Yuan – the offshore pair – fell slightly, but moved below the 7.1 yuan level.