Asian currencies traded within a narrow range on Monday, as investors reacted coolly to China’s latest fiscal spending efforts. Meanwhile, the U.S. dollar held steady, with traders eyeing key consumer inflation data expected later this week.
Asian currencies have faced significant losses in recent sessions as the dollar strengthened following Donald Trump’s victory in the 2024 U.S. presidential election. Although the Federal Reserve’s recent interest rate cut briefly slowed the dollar’s rise, the greenback retained much of its recent gains.
The Japanese yen and Chinese yuan experienced some of the steepest declines, while most Asian currencies continued to struggle.
Both the dollar index and its futures edged higher in Asian markets, with a sharp focus on upcoming U.S. consumer inflation data for October. A series of speeches from Federal Reserve officials is also anticipated this week after the central bank reduced rates by 25 basis points last week.
Chinese Yuan Weakens as Investors Disappointed by Stimulus Measures
The Chinese yuan’s USDCNY pair gained 0.1%, remaining close to three-month highs following the announcement from China’s National People’s Congress (NPC) regarding increased fiscal spending.
Last week, the NPC approved a substantial $1.4 trillion debt package aimed at easing the debt burden on local governments. However, the measure fell short of investors’ expectations for more targeted fiscal policies.
Though Beijing hinted at additional stimulus, no specific timeline was provided. Analysts at ANZ speculated that China might be waiting to assess U.S. trade policies under the Trump administration before introducing further economic measures.
Trump’s campaign promises of imposing steep tariffs on Chinese imports pose challenges to China’s economy, which is already contending with slower growth.
Data from the weekend showed that Chinese consumer inflation slowed in October, while producer inflation declined for the 25th month in a row.
ANZ analysts suggested that upcoming high-level Chinese political meetings in December could offer further insights into potential stimulus actions, with particular attention on efforts to boost private consumption and address the property market downturn.
Japanese Yen Softens Amid Bank of Japan Policy Uncertainty
The Japanese yen weakened on Monday, with the USDJPY pair rising 0.5%, approaching three-month highs.
Minutes from the Bank of Japan’s October policy meeting revealed internal divisions on further interest rate hikes, adding to the uncertainty around the timing of future adjustments. This uncertainty has weighed on the yen, which has already been pressured by Japan’s political climate after the ruling Liberal Democratic Party lost its parliamentary majority last month.
Across the region, other Asian currencies remained mostly steady following recent losses against the dollar.
The South Korean won’s USDKRW pair saw a slight uptick, while the Singapore dollar’s USDSGD pair increased by 0.2%.
The Australian dollar’s AUDUSD pair gained 0.2%, while the Indian rupee’s USDINR pair held near record highs around 84.4 rupees.
