© Reuters.
Investing.com – Asian currencies were mostly flat on Monday as weaker-than-expected US inflation readings raised hopes that the Federal Reserve will soften its hawkish stance, with focus also shifting to more US economic signals this week.
The US dollar stabilized after falling on Friday, as the Fed’s preferred measure of inflation read a weaker-than-expected reading for the month of May.
And it is trading sideways in Asian trade after losing about 0.4% each on Friday.
Most Asian units benefited from losses in the dollar, although gains were limited after mixed economic readings from the region’s largest economy. Markets are still later in July.
The Chinese Yuan is rising after factory activity beat expectations
It added 0.1% as it showed that China’s manufacturing sector grew slightly more than expected in June. But the reading was weaker than the May data, suggesting some bright spots in the Chinese economy may be running out of gas.
The yuan also benefited from a stronger daily midpoint fix by the People’s Bank of China. But China’s currency remained near seven-month lows as a worsening outlook for the economy and the prospect of further interest rate cuts in the country kept the yuan’s appeal muted.
Concerns about China kept gains in most Asian currencies capped. It added 0.5%, while declining by 0.2%, although the data referred to the Japanese economy.
The index rose 0.3%, hitting a two-month high amid growing optimism about the South Asian economy.
The stability of the Australian dollar before the Reserve Bank of Australia
It moved slightly on Monday, amid some uncertainty about whether it will raise interest rates on Tuesday.
Although core inflation rates eased overall in May, core inflation remained high and above the RBA’s target range, fueling expectations that the bank may need to raise interest rates further. Analysts are divided on a 25 basis point increase this week.
Other data on Monday also indicated further calm in the Australian economy, with further contraction in June.
Fed minutes, non-farm payrolls on tap
But despite Monday’s gains, most Asian currencies were still trading the weakest for the year, amid continued pressure from rising US interest rates.
Data this week is expected to provide more clues about the world’s largest economy, and is due for release on Wednesday.
– The key labor market gauge monitored by the Fed – is also due on Friday and is largely expected to factor into US monetary policy.