Most Asian currencies and the U.S. dollar remained relatively steady on Monday as investors cautiously weighed the likelihood of a Federal Reserve rate cut later this month, with key U.S. payroll data due at the end of the week.
With U.S. markets closed for a public holiday, market participants focused on regional economic indicators, including factory activity from Japan and China. The U.S. Dollar Index, which tracks the greenback against a basket of major currencies, slipped 0.1% during Asian trading hours after finishing largely flat last week. U.S. Dollar Index futures were largely unchanged as of 04:59 GMT.
Markets Digest Fed Easing Prospects After PCE Data
Currency movements remained muted as traders assessed the potential for Fed policy easing next month. According to the CME FedWatch tool, there is an 89% probability of a 25-basis-point rate cut at the September 16–17 meeting. Expectations were supported by Fed Chair Jerome Powell’s comments at the Jackson Hole symposium, where he emphasized that policymakers are ready to adjust policy if inflation continues to ease and the labor market shows signs of slowing.
Data released Friday showed the U.S. core PCE price index, the Fed’s preferred inflation gauge, rose 0.3% month-on-month, bringing the annual rate to 2.9%, the highest in five months. The figures were in line with expectations, suggesting that U.S. President Donald Trump’s broad tariffs have not significantly passed through to consumer prices, despite recent surprises in producer inflation. Attention now turns to Friday’s August nonfarm payrolls report, which will be critical in shaping bets for a rate cut.
Asian Currencies Show Limited Moves; PMIs Mixed
The Indian rupee edged up 0.1% to 88.25 per dollar, staying near Friday’s record high of 88.31. The Japanese yen was largely unchanged. A private survey indicated Japan’s factory activity contracted in August, hit by declining export orders as U.S. tariffs weighed on export-focused manufacturers.
In China, the onshore yuan (USD/CNY) remained steady, while the offshore yuan (USD/CNH) ticked 0.1% higher. A RatingDog survey showed factory activity expanded at its fastest pace in five months, reflecting easing U.S.-China trade tensions. This contrasted with the official PMI, which reported a fifth consecutive contraction in August, but offered some optimism for a potential rebound in industrial demand.
Elsewhere, the South Korean won rose 0.3% versus the dollar, the Singapore dollar traded flat, and the Australian dollar gained 0.1% against the greenback.
Investors are also monitoring concerns over Fed independence after President Trump attempted last week to dismiss Federal Reserve Governor Lisa Cook over alleged mortgage fraud in 2021. Cook has rejected the move and filed a lawsuit challenging her removal.
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