Most Asian currencies rose on Tuesday as China’s yuan was supported by Beijing’s announcement of more stimulus measures, while the Australian dollar rose in anticipation of hawkish signals from the Reserve Bank.
The weakness in the US dollar helped regional markets, as the greenback remained weak after the Federal Reserve cut interest rates last week. The focus this week is on further signals from the Fed, as well as key inflation data.
Sentiment towards regional markets was boosted by the Chinese government rolling out more stimulus measures aimed at supporting faltering economic growth.
Chinese Yuan Hits 16-Month High on Stimulus
The Chinese yuan rose on Tuesday, with the pair falling 0.2% to its lowest level since May 2023.
Chinese markets rose after the government announced a series of stimulus measures, most notably cutting reserve requirements for banks, along with lowering mortgage rates to boost the property market.
The move has raised hopes of a recovery in Asia’s largest economy, which could spread to the region. But recent economic readings have shown a steady slowdown in economic activity through most of the third quarter.
Lower interest rates also point to further weakness in the yuan, although recent government intervention has kept the currency strong.
The offshore yuan also fell 0.2% to a 16-month low.
Australian dollar rises ahead of RBA decision
The Australian dollar rose, with the pair up 0.2% and approaching its 2024 peak.
The Reserve Bank of Australia is widely expected to announce this at the conclusion of its meeting later today.
But recent signs of steady inflation and a strong labour market are expected to prompt a hawkish stance from the central bank, with the RBA likely to signal that interest rates will remain high for longer.
This trend makes the RBA an outlier among its global peers, but it also benefits the Australian dollar.
Broader Asian currencies rose. The Japanese yen steadied after a sharp drop overnight. Purchasing managers’ index data showed a continued decline in Japanese activity, while the Japanese economy posted stronger growth.
The South Korean won pair fell slightly.
Stock futures were steady in Asian trading after a slow start to the week.
The Singapore dollar pair fell slightly, while the Indian rupee pair retreated further from its record highs.