Investing.com–Most Asian currencies weakened on Tuesday, while the dollar held steady as focus remained on when the Federal Reserve will begin cutting interest rates.
The Japanese yen’s underperformance continued as the currency continued to reverse much of the gains made last week from government intervention.
The Australian dollar also fell after the Reserve Bank of Australia took a less hawkish tone than markets expected, denting expectations for more rate hikes in the country.
The Japanese yen weakens after intervention, USDJPY rises
Japanese yen weakness continued on Tuesday, with the pair, which is inversely representative of the yen’s strength, rising 0.4% to move past the 154 level.
The currency pair had risen as high as 160 by the end of April before clear examples of government dollar selling saw the pair fall sharply to a low of 152.
But the yen struggled to maintain any strength as the main factor behind the decline – a large difference between US and Japanese interest rates – largely remained in play.
Markets are now looking at more data on Japanese inflation and wage growth to gauge whether the Bank of Japan will raise interest rates further this year, which is expected to provide some relief for the Japanese currency.
Repeated verbal warnings of more intervention from Japanese government officials also provided little support for the yen, with traders viewing USDJPY at 160 as the new line in the sand for the government.
The Australian dollar is falling as the RBA no longer mentions rate hikes
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The Australian dollar pair fell 0.3% after the RBA held rates steady as widely expected and warned that inflation will take longer to fall in the near term.
But the RBA made no mention of plans for further rate hikes, disappointing traders preparing for such signals, especially after higher-than-expected inflation in the first quarter.
This took into account the weakness of the AUDUSD, as higher interest rates make the currency more attractive.
Weak first-quarter data also left traders wondering how aggressive the RBA will be.
The Asian currency is weakening as the dollar remains stable after recent losses
Broader Asian currencies fell slightly on Tuesday after recovering a benchmark from last week’s losses.
The focus this week is on comments from several Fed officials about the path in interest rates, especially after disappointing data showed traders once again starting to price in interest rate cuts by the central bank.
But this idea provided little support for the Asian currency, as the Fed is still not expected to start cutting rates until September.
The Chinese yuan pair rose 0.2%, while the South Korean won pair rose almost 0.3%.
The Singapore dollar pair rose 0.1%, while the Indian rupee rose marginally and was in sight of record highs reached in late April.
