Asian forex firms, yen strong as dollar interest rate cut bets send greenback to 13-month low By Investing.com

Investing.com– Most Asian currencies strengthened on Monday, with the Japanese yen rising sharply on growing bets that the Federal Reserve will cut interest rates in September, sending the greenback to 13-month lows.

Most regional currencies extended gains from the previous week, especially after Fed Chairman Jerome Powell’s comments on Friday cemented expectations for a rate cut.

But the anticipation of more U.S. economic data this week, particularly key inflation data, still spurred some caution as markets remained uncertain about the size of September’s cut.

Dollar at 13-month low as September interest rate all but confirmed

And both fell slightly in Asian trade and were trading at their weakest levels since July 2023.

The Green Bill was pressured by Powell’s comments as the Fed chairman said further cooling in the labor market was unhealthy and said it was time to start adjusting policy accordingly.

Speaking at the Jackson Hole Symposium, Powell noted that inflation is nearing the Fed’s 2 percent annual target, but said the timing and extent of any rate cuts would still depend on economic data.

Powell’s comments cemented expectations for a September cut. But it showed traders split between a discount of 25 and 50 basis points.

In his comments, the focus turned directly to upcoming economic data this week, with data due on Friday expected to provide more definitive clues on rates.

The reading is the Fed’s preferred inflation gauge and is likely to factor into the central bank’s rate outlook.

Strong Japanese yen, USDJPY near August lows

The Japanese yen was among the best performers in Asia, with the pair down 0.4% on Monday. The pair was also close to lows last seen in early August, when a tight bank of Japan, increased safe-haven demand and an ongoing exchange of trades pushed the currency to its strongest levels since the start of the month January.

But the yen’s strength somewhat undercut a risk-on move in Asian markets, as it also featured a further pick-up in carry trade that fueled strong capital flows into Asian markets.

The yen is likely poised for more strength this year, especially with the prospect of lower interest rates in the US and potential rate hikes by the Bank of Japan.

coming up on Friday, will provide more clues.

Broader Asian currencies have been a mixed bag. The Chinese yuan pair fell slightly after the People’s Bank kept its medium-term lending rate unchanged and withdrew about 101 billion yuan of liquidity through the facility.

The Aussie dollar pair fell 0.2%, cooling after strong gains over the past week.

The South Korean won rose 0.2 percent, while the Indian rupee settled after breaking well below record highs on Friday.