Investing.com — Most Asian currencies fell on Tuesday, while the dollar held steady at its highest level in more than two months amid continued bets that the Federal Reserve will cut interest rates at a slower pace.
Comments made by Federal Reserve officials have reinforced this idea, especially after recent data showed inflation and the labor market in the United States are resilient. Traders were seen preparing for smaller interest rate cuts in November.
Sentiment towards Asian markets was dampened by waning cheer over recent stimulus measures from China, especially as Beijing left out key details from a press conference on planned fiscal measures. The yuan weakened further on Tuesday.
The dollar is steady near its highest level in two months
It fell slightly in Asian trading after hitting its highest level in two months on Monday.
The dollar has found its footing in recent weeks as U.S. employment and inflation readings spurred bets on a slowdown in the pace of interest rate cuts by the Federal Reserve.
Fed Governor Christopher Waller reinforced that idea on Monday, calling for “more caution” about future interest rate cuts. Waller said the central bank should cut interest rates only gradually in the coming months.
The Fed cut interest rates by 50 basis points in September and announced the start of an easing cycle, although it also maintained a largely data-driven approach to future easing.
Traders have shown that there is an 86.8% chance of a 25 basis point rate cut in November, with chance rates of 13.2% remaining unchanged.
Most Asian currencies fell over the past two weeks due to this idea, and most of them were negative on Tuesday. The Japanese Yen pair fell slightly, but was close to breaching the 150 yen level.
The Australian dollar pair fell marginally, but posted losses in recent sessions tracking weak commodity prices.
The South Korean won pair rose by 0.3% after the Bank of Korea lowered interest rates last week, while the Singapore dollar pair rose slightly.
The Indian rupee pair remained close to its record high of Rs 84, even as September inflation data read higher than expected.
Chinese yuan weakens as stimulus cheer wanes
The Chinese yuan was among the worst performing currencies on Tuesday, with the pair rising 0.3% to the highest level in almost a month.
Sentiment towards the yuan remained volatile as traders were only marginally affected by China’s plans to distribute fiscal stimulus. The Ministry of Finance also did not provide basic details about the planned measures, specifically their size and timing.
Sentiment towards China was also affected by a series of weak economic readings. Data on Monday showed China’s economy contracted more than expected in September amid a sharp slowdown in growth, while previous readings showed the deflationary trend remains in place.
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