Investing.com – Most Asian currencies traded flat to low on Monday, while the dollar steadied after recent swings as attention turned directly to upcoming U.S. inflation data for more clues on interest rates.
Average Chinese inflation data weighed on the yuan and also caused slight weakness in other China-exposed currencies.
Chinese yuan weakens amid average inflation and trade concerns
The yuan rose 0.1% on Monday, hitting a two-week high after data released over the weekend gave mixed signals on inflation in China.
Inflation rose more than expected in April as continued stimulus from Beijing helped support demand. But inflation fell for the 19th month in a row as business activity in China remained sluggish.
Inflation data showed Beijing still has a long way to go to support economic growth.
Traders are also wary of China after reports emerged last week that the Biden administration was preparing new trade tariffs against the country, particularly on China’s electric vehicle sector. The move could reignite a trade war between the world’s largest economies.
Other currencies exposed to China posted moderate losses on Monday. The Australian dollar fell 0.1%, while the Singapore dollar edged up slightly.
The South Korean won fell 0.1%.
The Japanese yen fluctuates in anticipation of intervention
The Japanese yen remained virtually unchanged on Monday, with the pair hovering just below the 156 level.
The focus remained on any potential government intervention to support the currency, following at least two instances of intervention in early May. The government was seen to intervene to bring USDJPY down from 34-year highs above 160.
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While 160 is seen as the government’s cut-off figure, analysts warn that intervention could come sooner.
Dollar stable ahead of consumer price index data
On Monday, changes in Asian trading were insignificant.
But traders remain biased towards the US dollar ahead of key US inflation data later this week.
Wednesday’s release will be in focus given it is likely to impact the outlook for US interest rates.
The dollar saw wild swings last week as mixed U.S. economic indicators raised questions about when the central bank would start cutting interest rates this year. But while the U.S. economy has seemingly cooled in recent months, inflation is still projected to remain stable.