Most Asian currencies rose on Thursday while the dollar held steady ahead of further signals on interest rates, particularly from Federal Reserve Chairman Jerome Powell’s speech later in the day.
The Chinese yuan extended gains after hitting a 16-month high as traders took comfort from Beijing’s stimulus measures earlier this week. Optimism about China also boosted broader regional currencies.
The Japanese yen was an outlier, extending its overnight losses as sentiment toward Japan soured ahead of Friday’s 2024 Liberal Democratic Party presidential election, which will effectively determine the country’s next prime minister.
The dollar fell in Asian trading as its overnight recovery stalled, with the greenback suffering sharp losses over the past week after the Federal Reserve cut interest rates aggressively.
Dollar stable, waiting for Powell’s speech
Gold and silver prices stabilized in Asian trading after recording a sharp recovery on Wednesday.
The dollar recovered some of its losses last week after the Federal Reserve cut interest rates by 50 basis points, marking the start of an easing cycle.
Markets are focused squarely on further signals from the Federal Reserve this week, with a series of policymakers scheduled to speak in the coming days. The Fed chairman is due to speak later on Thursday.
Inflation data, the Fed’s preferred gauge of inflation, is due out on Friday and is also expected to influence the Fed’s next move. A revised reading for the second quarter, as well as weekly data, is due out on Thursday.
Chinese Yuan Rises as Stimulus Optimism Remains
The Chinese yuan pair fell by 0.2% on Thursday, remaining at its lowest level since May 2023.
The Chinese yuan posted strong gains after Beijing unveiled a series of major stimulus measures aimed at supporting growth. The People’s Bank of China cut bank reserve requirements by 50 basis points and also cut mortgage rates.
The move boosted confidence in China’s economic recovery, boosting the yuan’s value. But looser monetary conditions are expected to limit the yuan’s recovery.
Optimism about China helped boost other Asian currencies, with the Australian dollar up 0.3%.
The South Korean won fell 0.3%, while the Singapore dollar fell 0.2%. The Indian rupee rose slightly after rising on Wednesday.
The Japanese yen rose 0.1%, pulling further away from 2024 lows as sentiment towards Japan turned uncertain ahead of Friday’s Liberal Democratic Party election, which is set to determine the country’s next prime minister.
Analysts expect the leadership change in Japan to thwart the Bank of Japan’s plans to raise interest rates in the near term.
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