Investing.com– Most Asian currencies traded within a tight range Monday, with the dollar stabilizing after recent losses as traders waited for more signals on the Federal Reserve and U.S. inflation.
The Australian dollar was among the better performers, advancing ahead of the Reserve Bank of Australia meeting, where the central bank is likely to strike an aggressive chord.
Regional trading volumes were subdued due to a holiday in the Japanese market. But the yen weakened and retreated further after a nine-month peak last week. The yen pair rose 0.3% to 144.32 yen.
But apart from the yen, most Asian currencies continued to rise slightly from last week following a 50 basis point rate cut by the Fed.
Australian dollar gains thanks to RBA on tap
The Australian dollar pair rose 0.3% ahead of aggressive signals from the RBA on Tuesday.
It is widely expected that the central bank will do this. But persistent inflation and recent strength in the labor market are expected to prompt a hawkish stance from the RBA.
The central bank is also expected to signal that interest rates will remain high for even longer – a scenario that bodes well for the Australian dollar. The currency was trading near its highest level in ten months.
Dollar muted by Fed, inflation signals present
The and both rose slightly in Asian trading and stabilized after last week’s timber losses.
The Fed cut rates, marking the start of an easing cycle that could see rates fall by as much as 125 basis points this year. But overall losses in the dollar were still limited as the Fed indicated that neutral rates will also be much higher than in the past.
More signals from the central bank will follow this week, with a slew of Fed officials — in particular — set to speak in the coming days.
Also this Friday, the data – the Fed’s favorite inflation gauge – will provide more clues about the Fed’s plans to cut interest rates.
Broader Asian currencies moved from flat to low. The Chinese yuan pair fell slightly after the People’s Bank of China cut its 14-day repo rate to further ease monetary conditions and support economic growth.
The South Korean won pair rose 0.3%, while the Singapore dollar pair rose 0.2%.
The Indian rupee pair rose 0.1%, but remained well below recent record highs.
