Investing.com– Most Asian currencies rose sharply on Monday, following prolonged declines in the dollar amid growing bets that the Federal Reserve was done raising interest rates, while promises of more measures Chinese stimulus packages also helped confidence.
The dollar rose 0.5% to its highest level against the greenback since early August. The biggest support point for the yuan was a substantially stronger-than-expected daily midpoint fixing by the People’s Bank of China.
The People’s Bank of China kept its benchmark near record lows on Monday, while injecting about 80 billion yuan of liquidity into the economy.
Separately, Chinese officials pledged more policy support for the country’s beleaguered real estate sector, a move that helped shore up confidence in one of China’s biggest industries. Unrest in the real estate sector has been a major obstacle for China in the last three years.
Optimism about China rose 0.6%, also focusing on the Reserve Bank of Australia’s November meeting, scheduled for Tuesday. The RBA had raised interest rates by 25 basis points, but offered somewhat dovish signals on future rate hikes.
They jumped 0.6%, while seeing limited strength as oil prices recovered. Asian currencies in general were largely boosted by the weakness of the dollar, which sank to its lowest level in more than two months.
It was one of the biggest beneficiaries of the dollar’s weakness, rising 0.5% and strengthening below the 150 per dollar level for the first time in almost three weeks.
The yen had been hit by dovish signals from the Bank of Japan earlier this month, which indicated interest rates would likely remain ultra-low for the time being.
But now that markets are becoming less fearful of further U.S. rate hikes, the yen has found some breathing room.
Dollar falls, focus on Fed minutes
The and sank 0.3% each in Asian trading on Monday, languishing near two-month lows after a series of weak labor market and inflation readings last week.
The readings saw traders pricing in an even greater possibility that the Federal Reserve had finished raising interest rates and that the central bank could begin cutting rates as soon as March 2024.
Attention has now largely focused on the Federal Reserve’s late October meeting for more clues on monetary policy. The Federal Reserve had kept rates steady during the meeting, but had also reiterated its plans to keep rates higher for longer, a stance held by most Fed officials.
But trading volumes in the forex market will also be somewhat limited this week, due to the Thanksgiving holiday.