Investing.com — Most Asian currencies held steady Monday, paring some recent losses against the dollar, after in-line inflation data boosted expectations for rate cuts and caused the dollar to fall sharply.
The Indian rupee has been a standout performer among its peers, strengthening sharply after exit polls for the 2024 general elections pointed to a third consecutive victory for the incumbent BJP party.
Anticipating possible rate cuts due to the and this week, traders also favored risk-driven assets.
But gains in the regional currency were held back by continued caution on U.S. interest rates, especially ahead of key U.S. labor data and a Federal Reserve meeting.
Dollar nurses losses after PCE data is as expected
The and both fell slightly in Asian trading on Monday after posting steep losses on Friday.
The dollar’s losses came as the data – the Fed’s preferred inflation gauge – cooled, as expected, albeit slightly in April.
The outcome raised some expectations that the Fed will cut interest rates in September. Traders were pricing in a 47% chance of a 25 basis point cut in September, along with a 45% chance of a hold, according to the .
But these expectations will be tested in the coming days, with key data due this Friday and next week.
Most Asian currencies were cautious at this point. The Japanese yen pair hovered above 157, also impressed by weaker-than-expected data.
The Australian dollar pair fell 0.1%, while the Singapore dollar pair was little moved.
The South Korean won pair fell 0.3%, while the Chinese yuan pair rose 0.1%.
The yuan lagged slightly behind its peers after mixed purchasing managers’ index data. On Monday, it emerged that the country’s manufacturing sector grew in May, in contrast to last week when there was a contraction in the sector.
Indian Rupee Companies on Election Watch, USDINR Falls
The Indian rupee performed strongly among its Asian counterparts on Monday, with the pair – which measures the number of rupees needed to buy one dollar – falling 0.5% to 83,059 rupees.
Exit polls showed the NDA alliance, led by the BJP, would largely win the 2024 elections and deliver a third consecutive term to Prime Minister Narendra Modi.
Investors have largely applauded the BJP’s business-first measures over the past five years, which have led to excessive growth in the Indian economy.
The focus this week is also on a .
