Investing.com — Most Asian currencies stayed within a tight range Tuesday amid caution from a series of economic signals this week, with the yen stabilizing amid uncertainty over a possible rate hike by the Bank of Japan.
The dollar recovered somewhat after expectations of a Federal Reserve meeting prompted some flows into the greenback, mainly as traders speculated on whether the central bank would signal interest rate cuts.
Broader Asian currencies remained in the background as concerns about slowing Chinese economic growth and uncertainty over the US presidential election also weighed on risk sentiment.
Japanese yen stable, BOJ in focus
The Japanese yen was steady on Tuesday after rising sharply against the dollar over the past two weeks. The pair was hovering around 154 yen in morning trading.
The focus was squarely on a , with analysts divided over a possible rate cut or a 10-15 basis point increase by the central bank.
But beyond interest rates, the BOJ is widely expected to send aggressive signals by ending its quantitative easing policy. The central bank had said at its June meeting that it would outline plans to wind down its asset purchase programs in July.
Any aggressive signals from the BOJ are likely to push the yen higher. BoFA analysts say USDJPY could fall to 145 in an aggressive BOJ.
Dollar stable, gaining some ground ahead of Fed interest rate decision
The and stabilized on Tuesday after seeing some strength this week, with full emphasis on Wednesday.
It is widely expected that the central bank will leave interest rates unchanged. But any signals about when the country plans to cut interest rates will be closely watched.
Soft inflation data and dovish comments from Fed officials caused markets to ramp up bets that the Fed will cut rates by 25 basis points in September.
But markets are also considering a remote possibility of a similar cut on Wednesday.
Still, interest rate cuts do not bode well for the dollar, which fell sharply on this front for most of July.
Broader Asian currencies moved from flat to low. The Chinese yuan pair moved little and remained near eight-month highs amid continued concerns over slowing economic growth in the country.
July data will be released on Wednesday and is expected to provide more clues about business activity in the country.
The Australian dollar pair rose 0.1% but also suffered steep losses in July as a drop in commodity prices battered the currency.
The South Korean won pair rose 0.2%, while the Singapore dollar pair was flat.
The Indian rupee’s pair held steady after briefly hitting record highs this week, with a likely intervention from the Reserve Bank of India providing some strength to the rupee.
