Investing.com — Most Asian currencies stayed within a tight range Monday as sentiment toward the region was dented by weak Chinese business activity data, while the dollar retreated amid rising expectations of a rate cut.
A sharp downward revision to Japanese gross domestic product in the first quarter also kept sentiment towards Asia largely negative, while the yen remained vulnerable and largely on focus due to more potential government intervention.
Chinese Yuan Weak, PMIs Offer Mixed Signals
The Chinese yuan remained weak on Monday, with the pair holding at levels last seen in November.
The Purchasing Managers Index data painted a mixed picture of the economy. It emerged on Sunday that China’s manufacturing sector shrank for the second month in a row in June.
But it showed the sector growing at its fastest pace in three years.
The mixed signals came amid deteriorating sentiment toward China as trade jitters with the West and waning optimism over stimulus measures kept selling pressure on the yuan.
The broader Asian currencies, especially those with exposure to China, were in a tight range. The Australian dollar pair remained flat, while the Singapore dollar and South Korean won pair both strengthened slightly.
The Indian rupee pair saw some strength last week, remaining below June’s record highs.
Japanese Yen Vulnerable, USDJPY Rises After GDP Revision
The Japanese yen remained at its weakest level in 38 years. The pair rose to 161.19 yen on Monday, remaining well above the level that prompted government intervention in May.
The Japanese government unexpectedly revised first-quarter data on Monday, with the figures now showing a much deeper contraction than initially expected.
The figures presented a bleak outlook for the Japanese economy, and also raised doubts about how much room for maneuver the Bank of Japan has to tighten policy.
This thinking has been crucial for the yen, with recent dovish signals from the BOJ a key driver of the currency’s decline through June.
The dollar is retreating and more price clues are expected
The and both fell more than 0.2% each on Monday, extending losses from Friday after data showed a mild easing in inflation.
According to the data, traders increased their bets that the Federal Reserve would cut rates by 25 basis points in September.
The focus this week was entirely on more signals from the Fed. Chairman Jerome Powell will speak on Tuesday, with the talks taking place on Wednesday.
June data will be released on Friday.
