Asia FX steady as dollar drops amid rate cut speculation; Indian rupee surges By Investing.com

Investing.com — Asian currencies were mostly flat on Monday, reversing some recent losses against the dollar after embedded inflation data raised expectations for interest rate cuts and sparked sharp declines in the US currency.

The Indian rupee was a standout performer among its peers, rising sharply after exit polls for the 2024 general elections indicated a third straight win for the incumbent Bharatiya Janata Party.

Expectations of potential interest rate cuts earlier this week saw traders favoring risk-driven assets.

But gains in regional currencies were held back by continued caution over US interest rates, especially in anticipation of key US employment data and a Federal Reserve meeting.

The dollar suffers losses after reading personal consumption expenditures data as expected

Both fell slightly in Asian trade on Monday after posting sharp losses on Friday.

The losses in the US currency came as data – the Fed's preferred measure of inflation – slowed as expected in April, albeit slightly.

The reading raised some expectations that the Federal Reserve will begin cutting interest rates in September. Traders saw a 47% chance of a 25 basis point rate cut in September, along with a 45% chance of a suspension, according to .

But these expectations will be tested in the coming days, with key data released on Friday and next week.

Most Asian currencies were silent on this idea. The Japanese Yen pair is hovering above the 157 level, also affected by weaker than expected data.

The Australian dollar pair fell by 0.1%, while the Singapore dollar pair moved slightly.

The South Korean won pair fell 0.3%, while the Chinese yuan pair rose 0.1%.

The yuan lagged somewhat behind its peers after the mixed PMI data. Monday showed the country's manufacturing sector expanding in May, in contrast to last week which showed a contraction in the sector.

Indian rupee companies central election observation, USDINR slides

The Indian rupee was an outstanding performer among its Asian counterparts on Monday, as the pair – which measures the number of rupees needed to buy one dollar – fell 0.5% to 83,059 rupees.

Opinion polls have shown that the NDA alliance, led by the Bharatiya Janata Party, is set to largely sweep the 2024 elections, delivering a third consecutive term to Prime Minister Narendra Modi.

Investors have largely cheered the BJP's trade-first measures over the past five years, which have sparked massive growth in the Indian economy.

This week the focus is also on .