Asia FX rises as dollar slips on easing U.S. inflation
Investing.com -- The currencies of various Asian countries strengthened on Monday due to lower-than-anticipated inflation figures in the United States. This development has increased optimism that the Federal Reserve will reduce its strict approach to monetary policy. Additionally, attention is shifting towards upcoming economic indicators from the U.S. throughout the week.
The value of the US dollar stabilized following a decline on Friday, as the - the indicator for inflation favored by the Federal Reserve - showed weaker results than anticipated for the month of May.
The currency pair remained stagnant during Asian trading, following a decline of approximately 0.4% for each currency on Friday.
The decline in the value of the dollar helped boost Asian currencies to some extent, but their growth was hampered by contradictory economic reports from the largest economies in the region. Additionally, investors are also cautious due to upcoming market developments in July.
Chinese Yuan Gains After Strong Factory Data
The additional 0.1% signifies that the manufacturing industry in China expanded slightly more than anticipated in June. However, the figure was not as strong as the data recorded in May, suggesting that the few positive aspects of the Chinese economy might be losing momentum.
The yuan also gained from a firmer daily reference rate set by the People’s Bank of China. However, the Chinese currency remained near its lowest value in seven months, as a deteriorating economic forecast and the likelihood of additional interest rate reductions in the nation reduced the attractiveness of the yuan.
Worries related to China prevented significant increases in the value of most Asian currencies. The surplus grew by 0.5%, whereas the scarcity decreased by 0.2%, despite statistical evidence indicating positive developments in the Japanese economy.
The rose by 0.3%, reaching a nearly 60-day peak due to growing positivity about the economy in South Asia.
AUD Steady Before RBA Meeting
The market remained relatively stagnant on Monday, with some concerns regarding whether the central bank will increase interest rates tomorrow.
Although there was some improvement in May, the underlying inflation rate continued to stay high and exceeded the targeted range set by the RBA. This has led to the belief that the central bank might have to increase interest rates again. Experts have different opinions regarding the possibility of a 0.25% rate increase happening this week.
Additional information on Monday also indicated a further decline in the Australian economy, as it continued to contract in the month of June.
Important Economic Updates: Fed Minutes And Nonfarm Payrolls Await
However, despite the increased profits on Monday, the majority of Asian currencies were still experiencing significant declines for the year due to the ongoing impact of the escalating U.S. interest rates.
This week, there is anticipation for data that will offer more signals about the largest economy in the world. The data is scheduled to be released on Wednesday.
The Federal Reserve keeps a close eye on a significant labor market measurement which is scheduled to be released on Friday. It is highly anticipated that this measurement will play a considerable role in shaping the United States' monetary policy.
