Investing.com–Most Asian currencies weakened Tuesday, while the dollar strengthened slightly as traders waited for more signals on U.S. interest rates from the Federal Reserve.
Weakness in the Japanese yen continued and the currency returned to levels that had last prompted government intervention in the foreign exchange market.
Declining optimism about China also played a role in markets as traders waited to see how Beijing would roll out the recently unveiled stimulus measures.
Japanese Yen Weak as USDJPY Rises Above 156
The pair, which measures the amount of yen needed to buy one dollar, rose 0.2% on Tuesday to trade well above the 156 level.
The pair had reversed much of the declines caused by Japanese government interventions in the foreign exchange market to support the yen and was now within 4 yen of levels last triggered earlier in May led.
While this limited the yen’s losses, the currency still faced more weakness under continued pressure from US interest rates.
Uncertainty over the Bank of Japan’s plans to tighten policy also created a bleak outlook for the yen.
The dollar is moving higher as more Fed signals are available
The and rose about 0.1% each in Asian trading.
The dollar was buoyed by more comments from Fed officials that the central bank needed further convincing that inflation was falling, and that interest rates were likely to remain unchanged in the meantime.
This put a full spotlight on the Fed’s late April meeting, scheduled for Wednesday, for more insight into the bank’s stance on rates.
Several other Fed officials — mainly members of the bank’s rate-setting committee — will also speak in the coming days.
The prospect of US rates remaining high for longer bodes well for the dollar and bad for the more risk-driven, high-yield currencies.
The broader Asian currencies retreated on this idea. The Chinese yuan pair rose slightly and remained within sight of a six-month high. Optimism about China’s stimulus measures also cooled in recent sessions as traders awaited more positive economic data.
The Australian dollar pair fell 0.2%, while the Reserve Bank’s May meeting showed policymakers had considered a rate hike due to persistent inflation. But in the end they were left on hold.
The South Korean won pair rose 0.4%, while the Singapore dollar pair rose 0.1%.
