Asia FX muted with Fed rate path in focus; China keeps lending rates steady

Investing.com-- Most Asian currencies were little changed on Monday as the dollar extended gains from last week, while the Chinese yuan remained muted after the country’s central bank kept lending rates unchanged as expected. 

The US Dollar Index, which measures the greenback against a basket of major currencies, rose 0.1%, after rebounding sharply from over 3-year lows last week. 

US Dollar Index Futures traded 0.2% higher as of 04:07 GMT.

Dollar holds gains after rate cut; Fed speeched in focus

The dollar rebounded after the Federal Reserve reduced rates by 25 basis points last week, but Chairman Jerome Powell adopted a cautious tone regarding future rate reductions. 

Powell emphasized persistent inflationary risks and a cooling labor market, suggesting that the central bank would proceed with caution in its monetary policy adjustments.

Traders are now focusing on a series of speeches from Federal Reserve officials scheduled for this week. 

Approximately 10 Fed officials, including Chair Powell, are expected to provide further insights into the central bank’s economic outlook and policy direction. 

Of particular interest is Fed Governor Stephen Miran, who recently advocated for a more aggressive rate cut and is anticipated to elaborate on his stance.

Asian currencies remained rangebound, as traders sought a clearer direction on the Fed’s future path.

The Japanese yen’s USD/JPY pair ticked up 0.2%, while the Singapore dollar’s USD/SGD traded flat.

The South Korean won’s USD/KRW pair fell 0.4%, bucking the regional trend.

The Indian rupee’s USD/INR pair gained 0.1%, while the Indonesian rupiah’s USD/IDR rose 0.3%.

The Australian dollar’s AUD/USD pair remained largely unchanged. Reserve Bank of Australia Governor Michele Bullock noted that recent economic data have largely matched expectations, though the global outlook remains uncertain.

China keeps lending rates steady

The People’s Bank of China kept its benchmark loan prime rate unchanged on Monday, as anticipated, maintaining record-low levels amid domestic economic challenges.

The PBOC left its one-year LPR at 3.0%, and the five-year LPR at 3.5%  

Despite sluggish factory output and retail sales, the central bank opted to maintain its policy stance, possibly awaiting the upcoming Fourth Plenary Session in October for a reassessment.

The Chinese yuan’s onshore pair USD/CNY was little changed, while the offshore pair USD/CNH ticked 0.1% lower.