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Investing.com-- Most Asian currencies drifted lower on Monday, while the dollar firmed amid heightened risk aversion over the Israel-Iran conflict and a series of major central bank meetings this week.
The Japanese yen, which usually benefits from haven demand, weakened amid some caution before the conclusion of a Bank of Japan meeting on Tuesday. The central bank is widely expected to leave interest rates unchanged.
The Chinese yuan weakened slightly after a batch of mixed economic readings, which, while showing some resilience in the Chinese economy, still highlighted the impact of a bitter tariff exchange with the United States.
The dollar firmed before a Federal Reserve meeting this week, putting some pressure on Asian markets. Still, recent weakness in the dollar saw most regional currencies sitting on some gains in the past month.
Japanese yen softens, BOJ awaited
The Japanese yen’s USDJPY pair rose 0.3% on Monday, reversing course after logging some gains last week on increased safe haven demand.
Traders were averse towards the yen before a BOJ rate decision on Tuesday, although the central bank is widely expected to leave rates unchanged.
Focus will be squarely on the BOJ’s plans to further taper its bond purchases, although analysts see any near-term changes unlikely, given increased uncertainty over economic growth and trade.
But BOJ Governor Kazuo Ueda is expected to strike a hawkish tone, especially amid recent stickiness in Japanese inflation.
Chinese yuan flat amid mixed economic data
The Chinese yuan’s USDCNY pair rose slightly on Monday, as traders digested mixed economic prints from the country.
China’s industrial production grew slightly less than expected in May, as overseas orders were pressured by high U.S. trade tariffs.
But Chinese retail sales blew past expectations on support from a public holiday and ecommerce shopping events during the month. The print helped spur some confidence in China’s economy, given that soft consumer spending has been a major source of deflationary pressure in recent months.
The People’s Bank of China is set to decide on its loan prime rate later this week, and is expected to leave the rate unchanged after a cut earlier this year.
Broader Asian currencies mostly weakened, amid heightened caution over an Israel-Iran military escalation over the weekend.
The dollar index and dollar index futures rose 0.1% each in Asian trade, with the Fed widely expected to keep rates unchanged on Wednesday. But focus will be on Chair Jerome Powell’s commentary on future rate cuts.
Beyond the Fed, the Swiss National Bank, Bank of England, and the Bank of Indonesia are also set to decide on rates this week.
Among other Asian currencies, the Australian dollar’s AUDUSD pair fell 0.1%, while the Singapore dollar’s USDSGD pair rose 0.1%.
The Indian rupee’s USDINR pair was flat after clocking sustained losses earlier in June, after the Reserve Bank of India (NSE:BOI) cut interest rates by a bigger-than-expected margin.
The South Korean won was an outlier, with the USDKRW pair falling 0.3%. The won strengthened sharply in June after South Korea’s liberal party won the presidency in a snap election, potentially ending months of political upheaval in the east Asian country.