Investing.com – Most Asian currencies weakened on Tuesday, while the dollar strengthened slightly as traders awaited further signals from the Federal Reserve on U.S. interest rates.
The Japanese yen’s weakness continued, with the currency returning to levels that last attracted government intervention in the foreign exchange market.
Fading optimism about China also weighed on markets as traders waited to see how Beijing would implement its recently unveiled stimulus measures.
Japanese yen weakens as USDJPY rises above 156
The pair, which measures the number of yen needed to buy one dollar, rose 0.2% on Tuesday to trade well above the 156 level.
The pair reversed much of its decline caused by Japanese government intervention in the foreign exchange market to support the yen and is now less than 4 yen from levels that last attracted intervention earlier in May.
While this helped reduce the yen’s losses, the currency continued to experience further weakness in the face of continued pressure from US interest rates.
Uncertainty over the Bank of Japan’s plans to tighten policy has also created a gloomy outlook for the yen.
Dollar rises amid new Fed signals
In Asian trade prices rose by about 0.1%.
The dollar was buoyed by additional comments from Fed officials that the central bank still needs more evidence that inflation is falling and that interest rates are likely to remain unchanged in the interim.
That has put the focus on the Fed’s late-April meeting on Wednesday to better understand the bank’s position on rates.
Several other Fed officials – mostly members of the bank’s rate-setting committee – are also set to speak in the coming days.
The prospect of continued high, long-term interest rates in the US bodes well for the dollar and bad for riskier, higher-yielding currencies.
Asian currencies have generally retreated from this idea. The Chinese yuan rose slightly, remaining near a six-month high. Recent sessions have also seen a cooling in optimism about China’s stimulus measures as traders await more positive economic data.
The Australian dollar fell 0.2% even though the Reserve Bank’s May meeting showed policymakers were considering raising rates due to persistent inflation. But eventually they stopped.
The South Korean won rose 0.4% and the Singapore dollar rose 0.1%.