Investing.com — Most Asian currencies moved from flat to low on Tuesday as speculation about a Donald Trump presidency helped the dollar rise despite increased bets on interest rate cuts.
The Japanese yen underperformed its peers, pressured by a stronger dollar and continued warnings from authorities about interventions in the currency market.
Sentiment towards regional markets also remained negative following weak data from China, which indicated slowing growth in Asia’s largest economy.
Dollar Extends Recovery Amid Speculation About Trump Presidency
The and both rose 0.1% in Asian trading, extending their recovery from three-month lows.
Speculation about Trump winning a second term grew after an assassination attempt on the former president last weekend, which soared his popularity.
A second term for Trump is expected to be positive for the dollar as he is widely expected to pursue more protectionist trade policies that could lead to higher inflation. Such a scenario could keep interest rates relatively higher in the long term.
Still, the dollar posted sharp losses from last week as some soft inflation data and dovish signals from the Federal Reserve raised expectations that the central bank will cut rates by at least 25 basis points in September. This idea limited any major gains in the dollar.
The focus Tuesday was on upcoming figures, which are expected to provide more clues about a potentially cooling US economy.
The Japanese yen weakens, threats for interventions remain
The Japanese yen weakened on Tuesday, further cutting short the recent recovery against the dollar. The pair rose 0.4% to 158.64, after falling from almost 162 last week.
The pair’s sharp decline occurred as the dollar weakened significantly last week. But it had also fueled speculation about whether the Japanese government had intervened in the currency markets to support the yen.
Japanese officials on Tuesday reiterated their warnings about intervention, saying they were ready to take all possible measures to stem excessive volatility in currency markets.
Chinese Yuan Vulnerable Amid Economic Troubles, Trump Speculations
The Chinese yuan weakened on Tuesday, with the pair extending Monday’s gains and coming back within sight of an eight-month high.
The yuan was hit by data showing that the Chinese economy grew less than expected in the second quarter.
But speculation about a Trump presidency also weighed on the yuan, as he had maintained largely negative rhetoric toward Beijing during his first term. Trump had imposed high tariffs on several Chinese goods, sparking a trade war with China.
Broader Asian currencies moved from flat to low. The pair of the South Korean won and Singapore dollar rose about 0.1% each.
The Australian dollar pair fell 0.2%, while the Indian rupee pair remained near record highs.
