Investing.com — Most Asian currencies fell on Tuesday, with the Chinese yuan falling sharply as domestic trade resumed after a week-long holiday.
The dollar remained within sight of its highest levels in the last seven weeks amid growing bets on a slowdown in the pace of interest rate cuts by the Federal Reserve – a trend that has also affected most regional currencies.
The Japanese Yen was exceptional, with the pair falling 0.3% as it regained some of the sharp gains recorded over the past week. The data showed stability and also helped the yen.
Dollar declines on bets on smaller interest rate cuts; Expected inflation
They each fell about 0.2% in Asian trading, falling slightly from the seven-week highs recorded last week.
The dollar was supported mainly by stronger-than-expected data, which boosted bets that the Federal Reserve will cut interest rates by a smaller margin in the coming months.
Traders saw a roughly 81% chance that the Fed will cut interest rates by 25 basis points in November, and a roughly 19% chance of no changes in interest rates.
The focus is now on the Fed’s September meeting, scheduled for Wednesday, for further signals on monetary policy. The Fed cut interest rates by 50 basis points during the meeting, but indicated a data-driven approach to future cuts.
To this end, inflation data due later this week will likely take interest rate expectations into account.
The Chinese yuan is falling after a week-long pause
The Chinese yuan was the worst performer in Asia on Tuesday, with the local pair rising 0.7% as trade resumed a week later.
Sentiment towards China has been boosted by a series of stimulus measures from Beijing, which include lower interest rates, easing restrictions on the real estate market and increased liquidity measures.
But increased liquidity and lower interest rates are putting more pressure on the yuan, especially with US interest rates expected to remain higher.
Broader Asian currencies moved in a flat to lower range. The Australian dollar fell 0.3% after the Reserve Bank of Australia’s September meeting showed that policymakers were considering an eventual interest rate cut.
Separate data showed improvement in Australia, amid expectations of lower interest rates.
The South Korean won pair rose by 0.3%, while the Singapore dollar pair stabilized.
The Indian rupee pair is hovering near its record highs.