Investing.com–Most Asian currencies moved within tight ranges on Monday, with the yuan holding steady after the People’s Bank cut rates slightly more than expected, while the dollar remained near recent highs.
Regional currencies led losses in recent weeks as expectations of smaller US interest rate cuts supported the dollar, as well as signs of resilience in the US economy.
The dollar hit its highest in more than two and a half months, with risk aversion ahead of the US elections also supporting the currency.
Mediocre signals on Chinese stimulus also weighed on sentiment towards regional markets, while doubts over the Bank of Japan’s ability to raise rates kept the yen close to recent lows.
Chinese Yuan Stable After Cutting Loan Interest Rates
The yuan pair hovered around 7.1019 yuan on Monday following a strong midpoint fix from the People’s Bank.
The PBOC cut its benchmark slightly more than expected, with Monday’s cut coming amid a wave of recent stimulus from Beijing.
China last month announced its most aggressive round of stimulus yet, outlining both monetary and fiscal measures to support sluggish growth. This also ensured that Monday’s rate cut was largely expected by the markets.
But lower interest rates and more fiscal spending herald greater pressure on the yuan, especially with US interest rates likely to remain higher than initially expected.
Still, the prospect of more Chinese stimulus boosted currencies with exposure to the country. The Australian dollar pair rose 0.1%, while the Taiwan dollar pair fell 0.4%.
Other Asian currencies also saw some strength after recent losses. The Japanese yen pair fell 0.3% but remained close to 150 yen, while the South Korean won pair was flat.
The Singapore dollar pair fell slightly, while the Indian rupee pair remained above 84 rupees.
Dollar stable at more than 2.5 month high
The and both fell slightly in Asian trading, but remained near their strongest levels since early August.
The dollar was boosted by growing belief that U.S. interest rates will fall at a slower pace than initially expected, especially as recent data showed the U.S. economy remained strong. showed that traders were well positioned for a 25 basis point rate cut by the Federal Reserve in November.
The dollar also saw safe-haven play with less than three weeks to go until the 2024 presidential election. Recent polls pointed to a tight race between Kamala Harris and Donald Trump.
