Investing.com — Most Asian currencies retreated Monday, with the Japanese yen posting steep losses while the dollar stabilized after a recent recovery, as strong payroll data prompted bets on a smaller rate cut.
Regional trading volumes were dampened by a holiday in China, while markets were due to open on Tuesday.
Most Asian currencies posted sharp losses from the previous week as stronger-than-expected US non-farm payrolls data offset expectations of more interest rate cuts from the Federal Reserve, with markets now pricing in a smaller cut in November.
The dollar remains steady amid bets on a smaller rate cut
The and moved little in Asian trading after posting strong gains last week, especially after the .
These figures quashed fears of an economic slowdown in the US and reinforced the idea that the Fed does not need to cut rates sharply to support the economy.
Traders were seen largely wiping out their bets on another 50 basis point cut in November, pricing in a more than 90% chance of a 25 basis point cut, it showed.
The focus this week is on speeches from a slew of Fed officials, as well as the September Fed meeting. The Fed had cut rates by 50 basis points at the meeting and signaled the start of an easing cycle, although it still said future rate cuts will depend on data.
Inflation data for September will also be released later this week and will likely play a role in the Fed’s interest rate outlook. But the prospect of smaller rate cuts offers a less favorable environment for Asian markets.
Japanese yen at 1.5-month low, BOJ rate hikes in doubt
The Japanese yen was the worst performer among its regional peers last week, with the pair rising to its highest level since mid-August.
The yen was hit by growing doubts about the Bank of Japan’s ability to continue raising rates in the coming months, especially amid uncertainty about the upcoming Japanese general election.
Recent economic data also showed limited strength in the Japanese economy, which in turn could give the BOJ less room to raise rates further.
Broader Asian currencies were muted after suffering steep losses last week. Still, overall losses in the regional currency were limited by optimism over more stimulus in China. The country’s top economic planner will hold a briefing on Tuesday, outlining more economic support.
The Australian dollar pair rose 0.2%, while the South Korean won pair rose 0.1%.
The Singapore dollar pair was flat, as was that of the Indian rupee, although remaining close to record highs.
