Asia FX Is Lower, Dollar Falls As Fed, BOJ Meetings Approach By Investing.com

Investing.com– Most Asian currencies moved little on Monday in light holiday trading, 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 reduced due to holidays in Japan, China and South Korea. But the Japanese yen suddenly strengthened to a more than eight-month high with the Bank of Japan meeting later this week.

Dollar down on Fed rate cut speculation

And both fell 0.3 percent in Asian trade, extending a string of recent losses as markets braced for a likely interest rate cut this week.

The Fed cuts rates broadly at the end of a , although markets are divided just by how much the central bank will cut interest rates.

Traders price with a 50% chance of a 50 basis point discount and a 50% chance of a 25bps discount.

But despite uncertainty over the scale of the cut, the central bank is expected to kick off an easing cycle with the September meeting, with analysts forecasting rate cuts of at least 100 bps by the end of 2024.

Japanese yen at 8-month high, BOJ was waiting

The Japanese yen was the best performer among Asian currencies, with the pair 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.

Some of the yen’s move was fueled by lower trading volumes in local markets. But traders also got into the yen ahead of Friday, where the central bank is expected to offer a dovish outlook for interest rates.

The Japanese note due on Friday is also expected to read stronger, which in turn gives the BOJ more impetus to raise interest rates.

The yen has been on a strong rally since last week following a string of dovish comments from BOJ officials announcing higher rates.

Broader Asian currencies moved little in light holiday trade. The Australian dollar pair was an exception, rising 0.4%. The pair is usually seen as a starting point for 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 went below the 7.1 yuan level.