Asian Currencies Weaken as Dollar Awaits Fed Signals
Asian currencies showed slight weakness on Monday, while the dollar held steady as traders looked for more clues on interest rates from the Federal Reserve this week.
Japanese Yen Vulnerable Despite Possible Intervention
The Japanese yen remained fragile after shedding most of its gains from earlier in May due to suspected government intervention in the currency market. However, potential further losses were limited by the prospect of additional intervention.
Overall, currencies across the board experienced mild weakening as traders remained cautious about the trajectory of U.S. interest rates.
Chinese Yuan Struggles as PBOC Keeps Rates Unchanged
The Chinese yuan saw a modest 0.1% increase as the People’s Bank of China maintained its benchmark rates at historically low levels. While sentiment towards China improved with recent stimulus measures, the yuan did not strengthen significantly, given the ongoing downward pressure resulting from increased stimulus efforts.
Additionally, growing concerns over a potential trade war between the U.S. and China, sparked by reported trade restrictions imposed by China on American companies, continued to unsettle investors.
This unease had a ripple effect on other currencies exposed to Chinese trade, with the Australian dollar and the South Korean won both experiencing slight increases against the dollar.
Japanese Yen at Risk Amid Speculations of More Intervention
The Japanese yen edged up slightly on Monday, lingering near the 156 yen mark. Despite a recent dip to 151 yen following alleged market interventions, the yen partially rebounded due to concerns over U.S. interest rates and the Bank of Japan’s inaction.
However, traders remained wary of pushing the USDJPY pair past the 156 level, fearing potential government intervention.
Dollar Holds Steady Ahead of Fed Updates
Both gold and silver prices remained stable in Asian trading, recovering from last week’s losses. While softer-than-expected U.S. consumer inflation figures raised hopes of rate cuts by the Fed, conflicting statements from Fed officials underscored the uncertainty surrounding future rate decisions.
All eyes are now on the Federal Reserve, with the meeting minutes from late April set to release on Wednesday. Additionally, several Fed officials, particularly those on the rate-setting committee, are scheduled to speak this week.
