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Investing.com-- Most Asian currencies weakened on Tuesday, while the dollar steadied amid persistent uncertainty over U.S.-China trade talks, with anticipation of this week’s Federal Reserve meeting also coming into play.
Regional trading volumes were limited by market holidays in Japan and South Korea, while Chinese markets reopened after the Labor day holidays. The yuan firmed sharply in catch-up trade, while also benefiting from increased speculation over U.S.-China trade talks.
The dollar steadied after regaining some ground this week, although the greenback was still nursing steep losses from over the past three months. Comments from U.S. President Donald Trump and his cabinet did little to alleviate uncertainty over his tariff plans.
The Japanese yen’s USDJPY pair rose slightly on Tuesday, as did the South Korean won’s USDKRW pair.
The Taiwan dollar was the worst performer in Asia, with its USDTWD pair surging 3.7% after plummeting to a two-year low in recent sessions. The currency is at the heart of a potential unwinding in long-dollar positions among Asian currencies, which could also support other units in the region.
The Indian rupee’s USDINR pair rose 0.1%, while the Singapore dollar’s USDSGD pair rose 0.4%. The Australian dollar’s AUDUSD pair fell 0.2% after strong gains last week.
Chinese yuan soars to 6-wk high on trade talk hopes
The Chinese yuan’s onshore pair raced to its strongest level in over six weeks as trade resumed after the Labor Day holidays.
The yuan’s USDCNY pair slid 0.6% to 7.2302 yuan, its lowest level since late-March. The currency largely firmed past private purchasing managers data that showed services activity grew less than expected in April.
The currency was boosted chiefly by Beijing signaling that it was evaluating proposals from U.S. officials for trade talks, after the U.S. and China became embroiled in a bitter trade dispute in April.
China has called on the U.S. to lower its tariffs before any dialogue can take place, while President Donald Trump signaled that he will only lower tariffs on China if Beijing comes to the negotiating table first.
Trump said on Monday that China badly needed a trade deal, while Treasury Secretary Scott Bessent said he was confident that talks will progress in the coming weeks.
Dollar steadies as Fed meeting looms
The dollar index and dollar index futures moved little in Asian trade, steadying after logging some gains in recent sessions.
But the greenback was still nursing steep losses over the past three months, as traders fretted over the economic fallout of Trump’s policy. This trend was exacerbated by a steady unwinding in dollar long positions, especially in Asia, amid waning confidence in the U.S. economy. A string of weak economic readings also weighed.
Focus this week is squarely on the conclusion of a Fed meeting on Wednesday, where the central bank is widely expected to keep interest rates unchanged in the face of heightened economic uncertainty and sticky inflation.
Focus will also be on comments from Fed Chair Jerome Powell, amid repeated badgering from President Trump that Powell cut interest rates.