Investing.com – Most Asian currencies strengthened on Thursday, tracking dollar weakness as weak labor data continued to emerge, increasing bets that the Federal Reserve will begin cutting rates in the coming months.
The dollar is hovering just above a two-month low and remains weak as expectations of a rate cut push traders into more risk-oriented assets. US Treasury yields also fell.
Dollar close to 2-month low, bets on September rate cut rise
Both indexes fell about 0.2% in Asian trade, remaining close to their weakest levels since early April.
The dollar resumed its weakening on Wednesday after weak indicators pointed to further cooling in the labor market.
The data came after job openings were posted and also set the stage for soft data on Friday.
Other economic indicators also pointed to some cooling in the world’s largest economy, which could present a softer outlook for inflation and give the Fed more confidence that it can begin cutting rates.
Traders were confident the central bank would cut rates by 25 basis points in September.
This idea contributed to the rise of most Asian currencies. The Japanese yen fell 0.3% and remained well below recent peaks. The Bank of Japan is set to meet next week and is expected to potentially tighten policy.
The Australian dollar rose nearly 0.3%, although the country’s trade data showed it fell sharply in April. But it has expanded.
The Chinese yuan fell slightly but remained near a six-month high reached in May. Sentiment on China has weakened in recent sessions as traders awaited more signals on the country’s plans to support economic growth. Key trading data was also released this week.
The Singapore dollar fell 0.2% and the South Korean won fell 0.1% in holiday trading.
Indian rupee weakens amid post-election volatility
The Indian rupee pair, which measures the number of rupees needed to buy one dollar, remained close to a record high of over 83 rupees on Thursday.
The Indian currency has seen wild swings this week, briefly hitting a record low after the 2024 general election results showed the incumbent BJP-led alliance winning a much smaller majority than expected. The results presented a difficult third term for Prime Minister Narendra Modi, especially regarding the rollout of economic reforms.