Investing.com — Most Asian currencies fell on Monday with the Japanese yen taking sharp losses, while the dollar stabilized from a recent rebound as strong jobs data sparked bets on smaller interest rate cuts.
Regional trading volumes were affected by the holiday in China, and markets are scheduled to open on Tuesday.
Most Asian currencies suffered sharp losses since the previous week after stronger-than-expected US non-farm payrolls data dampened bets on further big interest rate cuts by the Federal Reserve, with markets now pricing in a smaller cut in November.
The dollar stabilizes amid bets on a smaller interest rate cut
The US Dollar Index moved little in Asian trade after posting strong gains last week, especially after Friday.
The reading dispelled fears of a slowdown in the US economy, and reinforced the idea that the Federal Reserve will not need to cut interest rates sharply to support the economy.
Traders were seen largely cleaning up their bets on another 50 basis point cut in November, and were calculating a more than 90% chance of a 25 basis point cut.
The focus this week is on speeches from a slew of Fed officials, as well as the Fed’s September meeting. The Fed cut interest rates by 50 basis points during the meeting and announced the start of an easing cycle, although it still says future interest rate cuts will depend on the data.
September inflation data is also due later this week, and will likely take into account the Fed’s interest rate expectations. But the prospect of smaller interest rate cuts represents a less favorable environment for Asian markets.
The Japanese yen is at its lowest level in a month and a half, and the Bank of Japan’s interest rate hike is in question
The Japanese yen was the worst performer among its regional counterparts last week, with the pair rising to its highest level since mid-August.
The yen was hit by growing doubts about the Bank of Japan’s ability to continue raising interest rates in the coming months, especially amid uncertainty over the upcoming Japanese general elections.
Recent economic data also showed limited strength in the Japanese economy, which may give the Bank of Japan less room to raise interest rates further.
The broader Asian currencies fell after recording sharp losses last week. However, overall losses in regional currencies were limited due to optimism about further stimulus measures in China. The country’s top economic planner is scheduled to hold a media briefing on Tuesday, outlining further economic support.
The Australian dollar pair rose 0.2%, while the South Korean won pair rose 0.1%.
The Singapore dollar pair stabilized, as did the Indian rupee pair, although it remained close to record highs.