Asian Currencies Stay Quiet Amid Focus on China Rates, Japanese Politics
Asian currencies remained mostly flat on Monday. The Chinese yuan showed little movement after the People’s Bank of China held its benchmark lending rates steady, as expected. Meanwhile, the Japanese yen edged slightly higher following a political shift in Japan, where the ruling coalition lost its majority in the upper house.
The U.S. Dollar Index—which tracks the greenback against a group of major currencies—was also stable during Asian trading hours.
Japan’s Ruling Bloc Loses Upper House Control
In the July 20 election, Prime Minister Shigeru Ishiba’s Liberal Democratic Party (LDP) and its coalition partner Komeito failed to secure the 50-seat threshold for a majority in the 248-seat upper house, winning only 47 seats.
ING analysts warned prior to the vote that a loss could increase political uncertainty, potentially impacting Japan’s fiscal policies and tariff talks with the U.S.
Despite the defeat, Ishiba confirmed he will remain in office, helping to ease investor worries about policy instability.
The yen strengthened slightly, with USD/JPY down 0.2%, buoyed by renewed speculation of an upcoming Bank of Japan rate hike.
However, investors remained cautious due to ongoing uncertainty surrounding U.S. trade tariffs, with a key decision expected from President Donald Trump by August 1.
ING noted that the BoJ would likely wait until trade tensions ease before moving on interest rates.
Muted Moves Across Asia FX Markets After PBoC Holds Rates
The People’s Bank of China kept its loan prime rate at record lows on Monday, aligning with market expectations. The decision follows slightly stronger-than-forecast Q2 GDP figures and comes amid moderating tensions between China and the U.S.
The onshore (USD/CNY) and offshore (USD/CNH) yuan exchange rates remained mostly flat.
Other Asian currencies also showed minor changes as traders stayed cautious:
- USD/KRW (South Korean won) rose 0.1%
- USD/SGD (Singapore dollar) was unchanged
- AUD/USD (Australian dollar) slipped 0.1%
- USD/INR (Indian rupee) gained 0.2%
- USD/THB (Thai baht) rose 0.3%
