Investing.com — Most Asian currencies drifted higher on Tuesday, while the greenback retreated as the greenback’s recovery was held back by continued expectations of rate cuts and uncertainty over the 2024 presidential election.
Still, sentiment toward Asia remained subdued by concerns about China, amid signs of a slowing economic recovery and uncertainty about how U.S. policy will treat the country in the coming months.
The Japanese yen performs better, USDJPY down to 156
The Japanese yen was the best performer on the day, continuing to appreciate against the dollar following a suspected government intervention last week.
The pair fell 0.4% to 156.41 yen, close to a 1-½ month low.
A senior member of the Japanese government called on Tuesday for more clarity on interest rate hikes by the Bank of Japan. The comments come just a week ahead of , where some analysts expect the bank to raise rates by 10 basis points. A recent increase in inflation across the country supported this idea, although inflation still remained relatively slow.
Uncertainty about the BOJ has been a major pressure on the yen in recent months, as the central bank has given little guidance on when it will tighten policy further.
Dollar falls due to presidential race, interest rate cuts in view
The and both fell 0.1% each in Asian trading, stalling after a sharp recovery over the past two sessions.
The dollar turned volatile amid increased uncertainty over the US presidential race after President Joe Biden said he would not seek re-election and endorsed Vice President Kamala Harris as the Democratic candidate.
According to reports on Monday, Harris had received enough support from Democratic delegates to become the party’s presidential nominee, but will still need to be formally nominated.
Yet Republican candidate Donald Trump appeared to be ahead of Biden and Harris last week, data from CBS and HarrisX showed.
Expectations of a Trump presidency had allowed for some strength in the dollar as analysts said he would likely pursue protectionist trade policies.
But the dollar has suffered steep losses in recent weeks amid growing belief that the Federal Reserve will cut interest rates in September. The central bank will meet next week.
Broader Asian currencies edged higher. The Singapore dollar pair fell 0.1%, while the South Korean won pair fell 0.3%. South Korea’s producer inflation rose slightly in June, data showed.
The Indian rupee pair fell slightly, but remained close to record highs from earlier in July. The focus was on the Indian government’s plans, which will be unveiled later in the day.
Chinese yuan vulnerable due to economic uncertainty
The Chinese yuan moved little on Tuesday and saw little relief after an unexpected rate cut by the People’s Bank of China.
The pair hovered around 7.2738 yuan, remaining close to levels last seen in November.
The currency has been hit by growing uncertainty about the Chinese economy, especially after recent data showed lower-than-expected growth in the second quarter.
Speculation about a Trump presidency also weighed on the yuan as Trump’s administration sparked a trade war with Beijing in the late 2010s.
Concerns about China are putting pressure on some Asian currencies. The Australian dollar pair fell 0.1%, pressured by the country’s large trade exposure to China.
