Asian currencies gained on Monday as the dollar eased from recent highs following weaker U.S. labor data, with market focus shifting toward the U.S. presidential election and the upcoming Federal Reserve meeting.
This week’s key events include the Reserve Bank of Australia (RBA) meeting and China’s National People’s Congress (NPC) session, which is expected to reveal further guidance on fiscal stimulus.
Asian currencies benefited from the dollar’s downturn, as both the dollar index and its futures fell around 0.6% in Asian trading. The greenback’s slip followed softer than expected U.S. nonfarm payrolls data, indicating a cooling labor market.
Uncertainty over the U.S. election, with a close race between Donald Trump and Kamala Harris, also weighed on the dollar ahead of Tuesday’s vote. Additionally, markets are preparing for a potential 25 basis point interest rate cut from the Federal Reserve later this week.
The Japanese yen weakened by 0.9% against the dollar, pulling back from recent highs, though it remained supported by a hawkish outlook from the Bank of Japan.
Chinese Yuan Holds Steady with NPC Meeting in Focus
The Chinese yuan edged 0.4% lower from recent highs, as markets awaited cues from the NPC Standing Committee meeting, set to start on Monday. The NPC is expected to discuss plans for increased fiscal spending, with reports hinting at up to $1.4 trillion in new debt issuance in the coming years.
This focus on fiscal policy comes amid efforts by Beijing to support slowing economic growth. Despite recent announcements of stimulus measures, market confidence remains cautious. Last week’s October Purchasing Managers Index data also indicated limited improvement in Chinese business activity.
Australian Dollar Strengthens Ahead of RBA Meeting
The Australian dollar climbed on Monday, with the AUD/USD pair up 0.8% ahead of the RBA’s upcoming decision. The central bank is expected to keep interest rates steady on Tuesday, signaling no immediate rate cuts, with forecasts from Westpac and ANZ suggesting a potential rate cut only by early 2025.
An RBA hold contrasts with other central banks, many of which began rate cuts earlier in the year, lending support to the Australian dollar.
Broad Gains for Asian Currencies as Dollar Weakens
Other Asian currencies also saw gains, with the Singapore dollar down 0.7% against the USD, and the South Korean won shedding 0.6%. However, the Indian rupee lagged slightly, with only a 0.1% decrease in the USD/INR pair, keeping it above 84 rupees.
