Asian Currencies, Dollar Trade Steady as Markets Await Fed Cut Signals and PMI Data
Most Asian currencies and the U.S. dollar were subdued on Monday as traders cautiously assessed the chances of a Federal Reserve rate cut this month. Attention is now on Friday’s U.S. nonfarm payrolls report, a key factor before the Fed’s September 16–17 policy meeting.
With U.S. markets closed for a holiday, investors focused on regional economic indicators, including factory activity surveys from Japan and China.
The U.S. Dollar Index (DXY), which tracks the greenback against major peers, slipped 0.1% in Asian trading hours after ending last week largely unchanged. Futures for the index were also flat as of 04:59 GMT.
Fed Easing Expectations Grow After PCE Inflation Data
Traders currently price in an 89% chance of a 25 basis point cut at the September Fed meeting, according to the CME FedWatch tool. Expectations strengthened after Fed Chair Jerome Powell, speaking at Jackson Hole, said policymakers were prepared to adjust policy if inflation continued to ease and the labor market weakened.
Recent data showed the core PCE price index—the Fed’s preferred inflation measure—rose 0.3% in July, pushing the annual rate to 2.9%, its highest in five months. The figure matched forecasts, suggesting that President Donald Trump’s tariffs have not yet driven a significant jump in consumer prices, despite stronger producer inflation.
Regional FX Moves and PMI Updates
- The Indian rupee (USD/INR) rose 0.1% to 88.25, staying close to last week’s record low of 88.31.
- The Japanese yen (USD/JPY) was little changed. A private survey showed Japan’s factory activity contracted in August, hit by weaker export orders due to U.S. tariffs.
- The Chinese yuan was stable, with USD/CNY flat onshore and USD/CNH up 0.1% offshore. A private survey indicated China’s factory activity expanded at the fastest pace in five months, contrasting with official data showing continued contraction.
- The South Korean won (USD/KRW) gained 0.3%, while the Singapore dollar (USD/SGD) traded flat.
- The Australian dollar (AUD/USD) ticked 0.1% higher.
Investors are also monitoring Fed independence after President Trump’s attempt to dismiss Fed Governor Lisa Cook, citing allegations from 2021. Cook has rejected Trump’s authority and filed a lawsuit to challenge her removal.
