Investing.com — Most Asian currencies rose Tuesday, while the dollar remained at more than seven-month lows amid growing belief that the Federal Reserve will cut interest rates in September.
The dollar’s weakness comes just days before a speech by Fed Chairman Jerome Powell at the Jackson Hole Symposium on Friday, where he is expected to give more clues about a rate cut.
A softer dollar fueled a strong rally in the Japanese yen on Monday, while the Chinese yuan weakened slightly after the People’s Bank left its key lending rate unchanged, as expected.
The dollar remains stable at the lowest level in seven months, Powell address looms
Trading in Asia remained steady after falling to the lowest level since early January on Monday.
The dollar fell along with US Treasury yields amid growing optimism that the Fed will cut rates in September.
Friday is expected to provide more clues on this front, although analysts do not expect the Fed chairman to definitively indicate when and by how much the central bank will cut rates.
Traders are pricing in a greater possibility of a 25 basis point cut in September, according to .
Lower interest rates are driving more dollar outflows and heralding some strength in Asian markets.
Japanese yen falls after sharp recovery
The Japanese yen weakened slightly on Tuesday, after a strong recovery in the previous session. The pair rose 0.3% to 147.01 yen, after falling to 145 yen.
The yen’s strength came mainly from a softer dollar, and because economic data from Japan showed that the Bank of Japan had more room to raise interest rates further this year.
The Chinese yuan weakens as the PBOC holds on to its prime lending rate
The Chinese yuan pair rose 0.1% with little support from the People’s Bank of China, which as expected left its benchmark unchanged.
The August support came after the PBOC unexpectedly cut the LPR in July as it took action to further stimulate economic growth.
The PBOC is widely expected to cut rates further this year amid growing concerns about an economic slowdown in China. This trend is also expected to keep the yuan under pressure.
Broader Asian currencies moved from flat to low on Tuesday. The Australian dollar pair fell 0.2%, while minutes of the Reserve Bank’s August meeting showed the central bank had considered a rate hike and was likely to keep rates unchanged for longer.
The Singapore dollar pair rose 0.2%, while the South Korean won pair rose 0.1%.
The Indian rupee pair remained below record highs amid signs of continued market intervention by the Reserve Bank of India.
