Investing.com — Most Asian currencies weakened slightly on Wednesday as the dollar recovered from two-month lows, while the Indian rupee tested record lows after 2024 general election results showed the ruling BJP party failed to deliver the expected made a profit.
Broader risk sentiment improved somewhat as weak US data fueled expectations that the Federal Reserve would eventually cut rates. But traders have been wary of tapping into risk-driven assets ahead of more signals on US yields this week.
The and rose 0.1% each after falling to the lows set two months earlier. Weak data led traders to bet even more that the Federal Reserve would start cutting rates in September.
But the focus this week was squarely on data on definitive signals in the labor market.
Indian Rupee Volatile, USDINR Spikes on Election Shock
The Indian rupee pair, which represents the number of rupees needed to buy one dollar, shot to a record high of 85 on Wednesday before gains were sharply curbed amid a perceived intervention from the Reserve Bank of India.
The volatility in the rupee, and broader Indian markets, came after results from the 2024 general election showed the ruling BJP party did not make expected gains. Instead, the party lost a significant number of seats to the opposing Indian National Congress.
While Prime Minister Narendra Modi is still set for a third term thanks to the NDA alliance, a weaker majority for the BJP poses problems for Modi in pushing through more economic reforms.
The Japanese yen weakens, but wage data announces strength
The Japanese yen pair rose 0.4% on Wednesday after sinking to a more than three-week low in overnight trading.
But the currency was poised for more strength in the short term, especially after positive wage growth data in April.
grew by 2.1%, as did employees, with both indicators reflecting the higher wages achieved by Japan’s major unions earlier this year.
Strong wages are linked to a more aggressive outlook for the Bank of Japan. The BOJ is expected to scale back some of its asset purchase policies to , which bodes well for the yen.
Broader Asian currencies saw small moves. The Australian dollar pair rose 0.2% even as data showed the economy grew less than expected in the first quarter.
But Michele Bullock, governor of the Reserve Bank of Australia, warned that rates could still rise if inflation remained persistent.
The Chinese yuan pair rose 0.1% even as private purchasing managers’ index data showed the country’s growth was stronger than expected.
The South Korean won pair fell 0.2%, while the Singapore dollar pair treaded water.
