July 9 2024: Most Asian currencies edged lower on Tuesday as the dollar regained some strength before Federal Reserve Chair Jerome Powell’s testimony, while the yen hovered around 38-year lows.
Sentiment towards Asia was also cautious due to ongoing concerns over new European import tariffs on China, which could prompt retaliatory measures from Beijing and potentially ignite a trade war.
The dollar index and dollar index futures rose slightly in Asian trade, stabilizing after steep losses last week amid increased bets on interest rate cuts by the Fed. Powell’s testimony is expected to provide more clarity on this trend later on Tuesday. Additionally, consumer price index data is due later this week, and several other Fed officials are scheduled to speak.
Japanese Yen Fragile as USD/JPY Retakes 161
The yen continued to underperform its Asian peers, with the USD/JPY pair rising 0.1% on Tuesday, moving back above the 161 yen level.
The yen found little support as a series of weak Japanese economic readings bolstered expectations that the Bank of Japan will have limited scope to raise interest rates further. Although recent data showed a pickup in average cash earnings, the increase was softer than expected for May. Other economic indicators also pointed to ongoing weakness in the Japanese economy.
This kept traders largely bearish on the yen, and warnings about potential government intervention in the currency market were largely ignored.
Chinese Yuan Weak, USD/CNY Near 7-Month High
The Chinese yuan was also among the weaker performers recently, with the USD/CNY pair rising 0.1%, approaching a seven-month high.
The yuan was pressured by heightened concerns over a trade war with the West after the EU imposed tariffs on Chinese electric vehicle imports, despite objections from Beijing. Markets are now watching for any retaliatory measures from China.
Declining optimism over a Chinese economic rebound also weighed on the yuan in recent weeks, following a series of weak data points in June. This week, the focus is on upcoming trade and inflation data for further insights into the economy.
Broader Asian Currencies in Flat-to-Low Range
Other Asian currencies moved within a flat-to-low range. The AUD/USD pair was flat after data showed a further decline in consumer sentiment in Australia in early July.
The USD/KRW pair in South Korea and the USD/SGD pair in Singapore also remained flat. The USD/INR pair for the Indian rupee rose slightly, staying close to record highs.
