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Asia FX muted, dollar steady as June rate cut bets recede

Anticipation of more cues on U.S. interest rates- specifically from inflation data and more Fed commentary- also kept sentiment towards Asian markets largely on edge. 

The dollar index and dollar index futures rose mildly in Asian trade, extending gains after a substantially stronger-than-expected nonfarm payrolls report for March. 

The report, which showed the U.S. labor market running hot, saw markets severely scale back expectations that the Fed will cut interest rates by as soon as June. 

Traders now expect a roughly 51% chance of a 25 basis point cut in June, down from 55% seen last week. Expectations for a hold jumped to a 46.8% possibility from 39.6% seen last week, according to the CME Fedwatch tool.

More cues on inflation are due on Wednesday from consumer price index data for March.

The minutes of the Fed’s March meeting are also due on Wednesday, and are expected to provide more cues after a slew of officials warned that the bank was in no hurry to trim rates.

The prospect of higher for longer U.S. rates presents more pressure on Asian currencies- a notion which kept most region units trading in a tight range on Monday.

The Japanese yen moved little on Monday, with the USDJPY pair hovering close to the 152 level. 

While the pair had fallen from the 152 level- its highest in 34 years- last week, it now appeared to be moving back towards those highs. Levels above 152 are expected to potentially attract intervention by Japanese authorities, after a slew of verbal warnings from Japanese ministers in recent weeks.

Japanese wage growth data read as expected for February. But wages are expected to pick up in the coming months, potentially heralding a more hawkish Bank of Japan.

Among other Asian units, the Chinese yuan moved little with the USDCNY pair pinned near five-month highs. The currency saw a renewed wave of selling in recent sessions, although further gains in the USDCNY pair were limited by measures from the People’s Bank of China.

The Australian dollar’s AUDUSD pair rose slightly, while the Indian rupee’s USDINR pair hovered well above the 83 level.

The South Korean won weakened slightly, with the USDKRW pair rising 0.1%, while the Singapore dollar’s USDSGD pair tread water.


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