Anna 
Asian currencies experienced varied movements on Monday as the U.S. dollar found stability after a decline prompted by disappointing nonfarm payrolls data released last week, which heightened expectations of potential Federal Reserve interest rate cuts.
The Japanese yen, which had surged last week amid suspected government intervention to counter its depreciation, retraced some of its gains. The USD/JPY pair rose by 0.6% as trading volumes remained subdued due to a market holiday in Japan. Despite intervention efforts, the yen’s weakness against the dollar persists, driven by substantial interest rate differentials favoring the U.S. currency.
In contrast, the Australian dollar strengthened, with the AUD/USD pair nearing two-month highs ahead of the Reserve Bank of Australia’s upcoming meeting. The RBA is anticipated to maintain current interest rates but may adopt a more hawkish stance following stronger-than-expected inflation data.
The broader movement of Asian currencies reflected the dollar’s recovery after last week’s decline. While several currencies gained ground against the dollar, the prospect of sustained high U.S. interest rates kept most regional currencies trading negative for the year.
In catch-up trading after a prolonged weekend, the Chinese yuan’s USD/CNY pair declined by 0.4%. The Singapore dollar’s USD/SGD pair rose by 0.2%, while the Indian rupee’s USD/INR pair increased by 0.1%, nearing record highs.
The dollar index, which measures the dollar against a basket of currencies, edged up by 0.1% in Asian trading after experiencing an 0.8% decline last week. Traders responded to the weaker labor market data by increasing their bets on Federal Reserve interest rate cuts, with expectations mounting for a 25 basis point reduction in September.
Overall, the movements in Asian currency markets underscore the sensitivity to U.S. monetary policy developments, with investors closely monitoring upcoming Fed speeches and central bank meetings for insights into future interest rate trajectories.
