Most Asian currencies and the dollar were subdued on Monday as traders cautiously gauged chances for a Federal Reserve rate cut this month, with crucial U.S. payrolls data due later this week.
Markets in the U.S. were closed for a public holiday, leaving traders assessing regional economic indicators, including factory activity data from Japan and China.
The US Dollar Index, which measures the greenback against a basket of major currencies, edged down 0.1% in Asia hours after ending largely flat last week.
US Dollar Index Futures were largely unchanged as of 04:59 GMT.
Markets assess Fed cut bets after PCE inflation Forex moves have been limited as investors remain cautious about the potential for Fed easing next month.
Traders see an 89% chance that the Fed will lower its benchmark rate by 25 basis points at the Sept. 16-17 meeting, according to CME FedWatch tool.
Expectations were reinforced after Fed Chair Jerome Powell said at the Jackson Hole conference that policymakers were prepared to adjust policy if inflation continued to moderate and the labor market showed signs of cooling.
Data released on Friday showed that the U.S. core PCE price index, the Federal Reserve’s preferred gauge of inflation, rose 0.3% on a monthly basis, putting the annual rate at 2.9%, its highest level in five months.
This was in line with expectations, suggesting that U.S. President Donald Trump’s sweeping tariffs were not filtering excessively into consumer prices, despite a recent upside surprise in producer inflation.
Attention now turns to Friday’s nonfarm payrolls report for August, which will be crucial to cement bets for a cut before the Fed meeting.
Asia FX muted, rupee near record low; regional PMIs The Indian rupee’s USD/INR pair gained 0.1% to 88.25 rupees, remaining near its record high level of 88.31 rupees on Friday.
The Japanese yen’s USD/JPY pair was largely muted on Monday.
A private survey showed on Monday that Japan’s factory activity contracted in August due to falling export orders as U.S. tariffs weighed on the export-focused manufacturing sector.
In China, the yuan’s onshore pair USD/CNY was little changed, while the offshore pair USD/CNH ticked 0.1% higher.
A RatingDog survey showed that China’s factory activity expanded at the fastest pace in five months in August amid easing U.S.-China trade worries.
The figures contrasted an official reading released on Sunday, showing a fifth consecutive contraction in August, but sparked optimism about a potential early signal of reviving Chinese industrial demand.
The South Korean won’s USD/KRW gained 0.3%, while the Singapore dollar’s USD/SGD traded flat.
The Australian dollar’s AUD/USD pair ticked 0.1% higher.
Investors are also worried about the Fed’s independence after President Donald Trump last week attempted to dismiss Federal Reserve Governor Lisa Cook, citing alleged mortgage fraud from 2021.
Cook has rejected Trump’s authority to remove her and has filed a lawsuit challenging the dismissal.
