Asian currencies saw modest gains on Monday, with the Japanese yen strengthening against the dollar after President-elect Donald Trump nominated fund manager Scott Bessent as Treasury Secretary. This move led to a drop in U.S. bond yields and weakened the dollar.
Yields on 10-year U.S. Treasuries fell to 4.351% as investors interpreted Bessent’s nomination as a signal for a more moderate approach on trade tariffs and immigration. The dollar index declined by 0.5% to 106.950, retreating from a two-year high of 108.090 reached last Friday.
The Japanese yen strengthened, with the USD/JPY pair down 0.4% after a similar drop last week. The yen’s performance closely follows Treasury yield movements, which have recently surged, weakening the currency.
The Chinese yuan (USD/CNY) remained steady, while the Malaysian ringgit (USD/MYR) weakened by 0.3%. The Australian dollar (AUD/USD) rose by 0.4%.
Dollar Eases After Recent Gains
The dollar pulled back after eight consecutive weeks of gains. Bessent’s nomination contributed to the decline, with markets viewing him as a potential voice of moderation in Trump’s administration.
Despite this, the dollar’s strength could persist in the long term, as Bessent supports a strong dollar and trade tariffs. Additionally, Trump’s economic policies, seen as inflationary, are expected to keep U.S. interest rates elevated for an extended period.
Market participants also reduced expectations for a Federal Reserve rate cut in December, with the likelihood now at 52%, down from 72% a month ago. The upcoming release of the PCE index, the Fed’s preferred inflation gauge, is expected to provide further clues on rate decisions.
Regional Economic Data in Focus
The Singapore dollar (USD/SGD) was stable after October inflation data showed a rise of 1.4% compared to a forecast of 1.8%, driven by lower costs in services, electricity, gas, and other goods.
The New Zealand dollar (NZD/USD) rose by 0.4%, recovering from a one-year low. The Reserve Bank of New Zealand is expected to cut interest rates by 50 basis points during its meeting on Wednesday.
The Indian rupee (USD/INR) slipped 0.2%, staying near record lows ahead of India’s third-quarter GDP release on Friday.
China is set to release industrial profit data on Wednesday and PMI figures for November on Saturday, which will provide further insights into its economic activity.
South Korea’s won (USD/KRW) dropped 0.2% as the Bank of Korea prepares to decide on interest rates this week, with the potential for further rate cuts.
