Investing.com — Most Asian currencies moved little in holiday thinned trading Monday, while the dollar fell as markets awaited a Federal Reserve meeting where 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 ahead of a Bank of Japan meeting later this week.
Dollar falls due to speculation about Fed interest rate cuts
The and both fell 0.3% in Asian trading, extending a string of recent losses as markets positioned for a likely rate cut this week.
The Fed is cutting interest rates widely at the end of the range, although markets are divided on how much the central bank will cut rates.
Traders estimate a 50% chance of a 50 basis point cut, and a 50% chance of a 25 basis point cut.
But despite uncertainty over the size of the cut, the central bank is widely expected to kick off an easing cycle at its September meeting, with analysts predicting a rate cut of at least 100 basis points by the end of 2024.
Japanese yen at over 8-month high, BOJ waited
The Japanese yen was the best performer among Asian currencies, with the pair down 0.6% to 140.04 yen, its lowest level since early January. The pair briefly fell below 140 for the first time since 2023.
Some of the yen’s move was fueled by lower trading volumes in local markets. But traders also piled into the yen ahead of Friday, where the central bank is expected to issue an aggressive outlook for interest rates.
Japanese yields are also expected to be stronger on Friday, which in turn gives the BOJ more impetus to raise rates.
The yen has rallied strongly since last week following a series of hawkish comments from BOJ officials announcing higher interest rates.
Broader Asian currencies moved little in the holiday thinning trade. The Australian dollar pair was an exception, rising 0.4%. The pair is generally considered a gauge of global risk appetite.
The Singapore dollar pair fell 0.2%, while the Indian rupee pair fell further below the 84 rupee level.
The Chinese yuan pair – the offshore pair – fell slightly, but moved below the 7.1 yuan level.
