Asian currencies moved in different directions on Monday, while the Chinese yuan held near a four-year high and the U.S. dollar remained broadly steady. Investors were positioning ahead of Tuesday’s U.S. midterm elections and key economic releases, including October employment data due later in the week.
The U.S. dollar index rose 0.1% to 101.94. USD/JPY gained 0.2% to 157.88, indicating a slightly weaker yen, while EUR/USD increased 0.1% to 1.1169 after touching a 17-month low of 1.1159. GBP/USD was little changed at 1.3386.
The euro remained under pressure after Fitch revised France’s credit outlook to negative from stable, citing deteriorating debt dynamics. Sterling also showed limited movement in early trading.
The offshore yuan traded at 6.6523 per dollar, while the onshore pair stood at 6.6540. The yuan strengthened to 6.659 per dollar on Friday, its strongest level since June 6, 2022. It has gained about 5% against the dollar this year and was on course for a fourth consecutive monthly advance, helped partly by exporters converting dollar earnings into the Chinese currency.
Markets are also focused on the U.S. elections, which will determine control of Congress and affect debates over government spending and federal borrowing. Democrats are broadly expected to win the House of Representatives, while the Senate outcome remains more uncertain. Analysts said a Democratic sweep could create obstacles for data-centre and artificial-intelligence infrastructure investment at the state level, while negotiations over the U.S. debt ceiling could become especially contentious.
The Federal Reserve, European Central Bank, Bank of Japan and Reserve Bank of New Zealand all left interest rates unchanged last week, as did the Bank of Thailand. The Bank of Japan maintained its rate at 1.25% in an 8-1 vote. The RBNZ’s decision to keep its rate at 2.75% was unexpected and contributed to a 1.2% weekly decline in the New Zealand dollar.
AUD/USD slipped 0.1% to $0.7024 before Tuesday’s Reserve Bank of Australia decision. The central bank is widely expected to raise its cash rate to 4.85%. NZD/USD fell 0.3% to $0.5614. The Bank of England and the central banks of Norway and Sweden are also due to announce policy decisions this week, while Bank Negara Malaysia is expected to leave its rate at 2.75% on Thursday.
The South Korean won weakened notably, with USD/KRW rising 0.7% to 1,342.83. The move came amid volatile foreign investment flows and uncertainty about the sustainability of the country’s equity rally, which has been driven heavily by semiconductor and AI-related stocks.
The People’s Bank of China set Friday’s yuan midpoint at 6.7138 per dollar, its strongest fixing since February 2023, although the rate was considerably weaker than market estimates. A private-sector survey released on Monday indicated continued manufacturing expansion and stronger factory output, providing some support for the yuan after the official manufacturing PMI showed contraction.
Inflation data from Taiwan, Thailand and the Philippines will offer further indications of regional price pressures. DBS expects South Korean exports to accelerate year on year in October and forecasts a trade surplus of $43 billion. It also expects Indonesia’s third-quarter growth to slow to 5.2% from 5.3%.
Elsewhere, USD/IDR rose 0.4% to 18,171, USD/SGD increased 0.2% to 1.2795 and USD/MYR advanced 0.3% to 4.0665.
Sources: Investing.com News.