Unlock Premium Data: Up to 50% Off InvestingProCLAIM SALE

Asia FX drifts higher, dollar weakens slightly before inflation test

Published 05/27/2024, 11:23 PM
© Reuters
USD/JPY
-
AUD/USD
-
USD/SGD
-
USD/INR
-
USD/KRW
-
USD/CNY
-
DX
-
DXY
-

Investing.com-- Most Asian currencies firmed slightly on Tuesday, while the dollar drifted lower in holiday-thinned trade as markets awaited inflation data from several major economies this week. 

Trading holidays in the U.S. and the UK made for languid foreign exchange markets on Monday. But this saw some flows out of the dollar and into more risk-driven currencies, particularly in Asia. 

Australia, Japanese inflation readings on tap this week

The Australian dollar was among the better performers for the day, with the AUDUSD pair rising 0.3% even as data showed retail sales grew less than expected in April.

The reading set up the possibility of a softer monthly consumer price index inflation reading for the month, which is due on Wednesday.

The Japanese yen firmed slightly, with the USDJPY pair falling 0.1%. But the pair remained close to recent highs as apparent currency market intervention by the government, at the beginning of May, provided only fleeting relief to the yen. 

CPI data from Tokyo is due this Friday and is likely to factor into the Bank of Japan’s outlook on interest rates. 

Dollar inches lower as PCE test looms

The dollar index and dollar index futures fell about 0.1% each on Tuesday, weakening slightly in low-volume trade on account of the Memorial Day holiday. 

Focus this week is squarely on PCE price index data, due Friday. The reading is the Federal Reserve’s preferred inflation gauge, and is likely to factor into the central bank’s outlook on interest rate cuts.

The PCE reading also comes as traders steadily priced out expectations of rate cuts by the Fed this year. The CME Fedwatch tool showed traders now expect a greater chance for a hold in September, compared to earlier, widespread bets on a cut. 

This trend comes as a string of Fed officials warned that sticky inflation will keep the central bank from loosening policy early. While Friday’s PCE reading is expected to show some cooling in price pressures, inflation is still expected to remain well above the Fed’s 2% annual target. 

This notion kept broader Asian currencies largely depressed. The Chinese yuan’s USDCNY pair was flat on Tuesday and remained close to six-month highs, amid creeping doubts over a Chinese economic recovery. 

Key Chinese purchasing managers index data is also on tap this week.

The South Korean won’s USDKRW pair fell 0.3%, while the Singapore dollar’s USDSGD pair fell 0.2%.

The Indian rupee’s USDINR pair moved little, but remained well below recent record highs.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.