Asian Currencies Weaken as Fed Rate Guidance Becomes Focal Point


Asian currencies generally declined, while the dollar slightly strengthened. The yen continued to weaken due to policy uncertainty and interest rate pressures.

On Tuesday, most Asian currencies weakened, and the dollar strengthened slightly. Investors are awaiting more guidance from the Federal Reserve on U.S. interest rates.

The yen continued to weaken, with the exchange rate returning to a level that previously prompted government intervention.

Optimism about the Chinese economy has waned, and traders are watching to see how Beijing implements recently announced stimulus measures.

Dollar Breaks 156 Against Yen, Yen Remains Under Pressure

The dollar rose 0.2% against the yen on Tuesday, surpassing the 156 mark.

Previously, the Japanese government intervened in the forex market to support the yen, but the dollar-yen exchange rate has since rebounded, recouping most of its losses and currently less than four yen away from the level that triggered intervention in early May.

Nevertheless, the yen remains under pressure from the continued rise in U.S. interest rates.

Additionally, uncertainty over whether the Bank of Japan will start tightening its policy has further weakened the yen.

Dollar Strengthens as Focus Turns to Fed's Rate Guidance

The Dollar Index and dollar futures each rose about 0.1% in Asian trading.

Recent statements from Federal Reserve officials suggest that the central bank still needs more evidence that inflation is decreasing and that interest rates could remain unchanged in the near term.

This makes the minutes of the Fed’s April meeting, to be released on Wednesday, a key focus for the market, providing more clues on the outlook for interest rates.

Additionally, several Fed officials, particularly members of the rate-setting committee, are scheduled to speak in the coming days.

U.S. interest rates may remain high for an extended period, which is favorable for the dollar while being unfavorable for riskier, high-yield currencies.

Asian Currencies Generally Decline

Amid these expectations, Asian currencies generally fell. The dollar-yuan exchange rate rose slightly, nearing a six-month high. Optimism about China's stimulus measures has recently waned as traders await more positive economic data.

Although the minutes of the Reserve Bank of Australia's May meeting showed that policymakers had considered raising rates due to persistent inflation, they ultimately chose to hold steady, leading to a 0.2% drop in the Australian dollar against the U.S. dollar.

The South Korean won rose 0.4% against the dollar, while the Singapore dollar rose 0.1% against the dollar.

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