Investing.com-- Most Asian currencies edged lower on Monday as the dollar remained near a three-week high ahead of a U.S. Federal Reserve meeting this week, while mixed economic data from China spurred concerns over a sluggish economic recovery.
The Fed is expected to cut interest rates by 25 basis points this week. However, expectations of a slower rate cut path by the Fed in 2025 have underpinned the U.S. dollar.
The US Dollar Index inched slightly lower in Asian trade on Monday but was hovering near a three-week high. The US Dollar Index Futures were marginally lower.
Chinese yuan slips after mixed economic data
The Chinese yuan’s onshore USD/CNY pair rose 0.2% and remained near a two-year high, while the offshore pair USD/CNH edged 0.1% higher.
Chinese industrial production grew as expected in November as recent stimulus measures from Beijing supported business activity, data showed on Monday.
China's home prices experienced a marginal decline in November, marking the slowest drop in 17 months. This trend reflects early signs of stabilization in the struggling property sector amid the government's efforts to revive the real estate sector.
However, retail sales for November were much lower compared to forecasts, and below last year’s reading, reflecting ongoing weakness in consumer spending despite policy support.
“Household confidence clearly remains soft, and it remains to be seen if the ‘vigorous support’ for consumption promised next year will be effective in stimulating a recovery. We expect the rollout of supportive policies could take some time, but overall retail sales growth should recover in 2025,” ING analysts said in a note.
The lingering slowdown in China is weighing on regional currencies. China's weaker-than-expected retail sales and ongoing challenges in its recovery are creating uncertainty across the broader Asia-Pacific region.
Dollar near 3-week high, Asia FX dips
The dollar index hovered near its highest level since November 26, even as traders positioned for a Fed rate cut next week.
The outlook for regional currencies remains pressured. The dollar is expected to remain strong on a slower Fed rate-cut trajectory next year.
Moreover, incoming President Donald Trump’s plans to impose additional tariffs on China and the country's measures to combat the tariffs are both expected to be dollar-positive.
The Japanese yen’s USD/JPY pair inched up 0.1% as Reuters reported the Bank of Japan was likely to keep interest rates unchanged this week, in contrast to earlier expectations of a hike.
The Singapore dollar’s USD/SGD pair inched slightly higher, while the Australian dollar’s AUD/USD pair gained 0.3%.
The Indian rupee’s USD/INR pair was largely unchanged, remaining near an all-time high hit last week.
The South Korean won’s USD/KRW pair inched higher. Country’s President Yoon Suk Yeol was impeached in a second vote by the opposition-led parliament on Saturday, over his attempt to impose martial law in the country.
South Korea's finance ministry vowed on Sunday to continue to swiftly deploy market stabilizing measures as needed to support the economy after the impeachment.