Investing.com — Most Asian currencies rose Thursday, tracking dollar weakness as soft labor data continues to trickle in, raising expectations that the Federal Reserve will start cutting interest rates in coming months.
The dollar hovered just above a two-month low and remained in the background as expectations of rate cuts pushed traders into more risk-driven assets. Interest rates on US government bonds also fell.
Dollar almost 2 months low, bets on interest rate cuts in September grow
The and both fell about 0.2% in Asian trading, remaining near their weakest levels since early April.
The dollar saw renewed weakness on Wednesday after soft signals pointed to further cooling in the labor market.
The lecture came after a soft job advertisement and also set the stage for a soft lecture on Friday.
Other economic indicators also pointed to some cooling in the world’s largest economy, which could mean a softer inflation outlook and give the Fed more confidence to start cutting rates.
Traders saw that the central bank will cut interest rates by 25 basis points in September.
This idea gave a boost to most Asian currencies. The Japanese yen pair fell 0.3%, remaining well below recent highs. The Bank of Japan meets next week and is expected to possibly tighten policy.
The Australian dollar pair rose almost 0.3% even as the country’s trade data showed, falling sharply in April. But it has become broader.
The Chinese yuan pair fell marginally but remained close to the six-month high reached in May. Sentiment toward China deteriorated in recent sessions as traders waited for more clues on the country’s plans to support economic growth. Key trading data was also available this week.
The Singapore dollar pair fell 0.2%, while the South Korean won pair fell 0.1% in holiday trading.
Indian rupee weak due to post-election volatility
The Indian rupee pair, which measures the number of rupees needed to buy one dollar, remained near record highs of over 83 rupees on Thursday.
The Indian currency has seen wild swings in these weeks, briefly hitting a low after the 2024 general election results showed the incumbent BJP-led alliance winning a much smaller majority than expected. The results marked a difficult third term for Prime Minister Narendra Modi, especially with regard to implementing economic reforms.
