Investing.com – Most Asian currencies weakened slightly on Monday, while the dollar steadied as traders awaited new interest rate signals from the Federal Reserve this week.
The Japanese yen remained fragile after losing most of its gains in early May following likely government intervention in the foreign exchange market. But further losses in the yen were blocked by the possibility of further intervention.
Major currencies weakened slightly as traders remained on edge over US interest rate movements.
Chinese yuan weak as PBOC leaves LPR unchanged
The Chinese yuan rose 0.1% after the People’s Bank kept the benchmark rate unchanged at a record low.
While sentiment towards China has improved over the past week on the back of increased stimulus and policy support from Beijing, the yuan has not strengthened as increased stimulus at home pointed to more downward pressure on the currency.
A potential trade war between the US and China has also kept investors on edge after China reportedly imposed new trade restrictions on some US companies, apparently in response to recent increases in US tariffs on key Chinese industries.
Concerns about China weighed on other currencies linked to trade with the country. The Australian dollar rose 0.1% and the South Korean won rose 0.5%.
The Singapore dollar pair was in a flat.
Japanese yen fragile, further intervention expected
The Japanese yen rose slightly on Monday and remained close to a breakout above the 156 yen level.
Although the pair fell to 151 pips earlier in May following apparent government intervention, it has recouped most of those losses as persistent concerns over high US interest rates and little action from the Bank of Japan hit the Japanese currency.
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However, traders remain cautious about breaking above the 156 level in USDJPY amid some concerns that it could trigger further government intervention.
The dollar is stable, more signals are expected from the Fed
Prices changed slightly in Asian trading on Monday, stabilizing after last week’s losses.
Some softer-than-expected US consumer inflation data has boosted hopes that the Fed will start cutting interest rates by September. But several Fed officials warned that the bank needed more confidence that inflation was falling.
This week the focus will be on further signals from the central bank as its late April meeting takes place on Wednesday.
A number of Fed officials, especially members of the bank’s rate-setting committee, are also set to speak this week.