Investing.com — Most Asian currencies were little changed on Monday in a holiday-light session, while the dollar edged lower as markets await a Federal Reserve meeting at which the central bank is likely to cut interest rates.
Regional trading volumes were subdued due to market holidays in Japan, China and South Korea, but the Japanese yen strengthened sharply to a more than eight-month high as the Bank of Japan meets later this week.
Dollar falls amid speculation about Fed rate cut
The dollar and euro both fell 0.3% in Asian trading, extending a string of recent losses as markets position for a likely interest rate cut this week.
The Federal Reserve cut rates broadly at the end of a session, though markets are divided on how much the central bank will cut rates.
Traders are pricing in a 50% chance of a 50 basis point cut and a 50% chance of a 25 basis point cut, they showed.
But despite uncertainty over the scale of the cut, the central bank is widely expected to kick off an easing cycle with its September meeting, with analysts forecasting at least 100 basis points of rate cuts by the end of 2024.
Japanese yen hits eight-month high ahead of BOJ
The Japanese yen was the best-performing currency among Asian currencies, falling 0.6% to 140.04 yen, its lowest level since early January. The pair briefly dipped below 140 for the first time since 2023.
Part of the yen’s move was due to lower trading volumes in local markets, but traders also turned to buying yen ahead of Friday’s session, when the central bank is expected to give a hawkish outlook on interest rates.
Japanese data, due on Friday, is also expected to be stronger, which in turn will give the BOJ more impetus to raise interest rates.
The yen had been staging a strong recovery since last week following a series of hawkish comments from BOJ officials announcing higher rates.
Asian currencies were generally little moved in a holiday-depressed market. The Australian dollar was an exception, up 0.4%. The pair is often seen as a proxy for global risk appetite.
The Singapore dollar pair fell 0.2%, while the Indian rupee pair fell further below the Rs 84 level.
The Chinese yuan pair – the offshore pair – fell slightly, but moved below the 7.1 yuan level.