Asian currencies weak, dollar strong amid bets on smaller US interest rate cut by Investing.com

Investing.com– Most Asian currencies retreated on Monday, with the Japanese yen suffering steep losses while the dollar steadied from a recent rally as strong wages data sparked bets on a smaller interest rate cut.

Regional trading volumes were held back by a holiday in China, with markets due to open on Tuesday.

Most Asian currencies suffered significant losses from the previous week after stronger-than-expected US payrolls canceled bets on more stunning interest rate cuts by the Federal Reserve, with markets now bracing for a further cut small in November.

The dollar settles amid bets on a smaller rate cut

And they moved a bit in Asian trade after posting strong gains last week, particularly after Friday’s.

The reading eased fears of a US economic slowdown and promoted the idea that the Fed will not need to cut rates sharply to support the economy.

Traders were mostly seen clearing bets on another 50-basis-point cut in November and pricing in a more than 90% chance of a 25-basis-point cut, it showed.

This week’s focus is on addresses from a large number of Fed officials, as well as the September Fed meeting. The Fed cut rates by 50 bps during the meeting and signaled the start of an easing cycle, though it still said future rate cuts would be data-dependent.

Inflation data for September is also available later this week and is likely to factor into the Fed’s rate outlook. But the prospect of smaller interest rate cuts presents a less favorable environment for Asian markets.

Japanese yen at 1-½ month low, BOJ rates on talk

The Japanese yen was the worst performer among its regional peers over the past week, with the pair hitting its highest level since mid-August.

The yen was hit by growing doubts about the Bank of Japan’s ability to continue raising interest rates in the coming months, especially amid uncertainty surrounding Japan’s upcoming general election.

Recent economic data also showed limited strength in the Japanese economy, which could in turn give the BOJ less room to raise rates.

Broader Asian currencies were halted after posting steep losses last week. However, overall losses in regional currencies were limited by optimism over more stimulus measures from China. The country’s top economic planner is scheduled to hold a briefing on Tuesday, outlining more economic support.

The Australian dollar rose 0.2%, while the South Korean won rose 0.1%.

The Singapore dollar pair was flat, as was the Indian rupee pair, although it remained close to record highs.