Investing.com– Most Asian currencies firmed on Tuesday, aided by a mix of dollar weakness and as promises of more Chinese stimulus aided sentiment, with focus now turning to an upcoming Federal Reserve meeting.
Weak U.S. data released overnight spurred more bets that the Federal Reserve will have limited headroom to keep raising interest rates, ahead of the beginning of a two-day meeting on Tuesday.
The dollar fell in Asian trade, as a rebound from 15-month lows ran out of steam. The and both fell about 0.1% each on Tuesday.
Chinese yuan rises amid stimulus talk, PBOC support
The jumped 0.4% on Tuesday, recovering sharply from the 7.2 level hit earlier this week. The currency was aided by a significantly stronger daily midpoint fix by the People’s Bank of China.
Media reports also suggested that Chinese state banks were once again selling dollars to support the yuan.
Sentiment towards China was elevated after officials from the Politburo- the Communist Party’s top decision-making body- vowed to step up stimulus efforts in order to support an economic recovery.
The body also flagged new efforts to stabilize the yuan, after the currency plummeted over 4% to the dollar this year.
But while stimulus measures bode well for the Chinese economy, increased liquidity could herald more pressure on the yuan, especially if the PBOC trims interest rates further.
Most other Asian currencies advanced on Tuesday. The rose 0.1% ahead of a meeting later in the week, while the was flat before a meeting later in the day.
The rose 0.3%, while the rose 0.1% to an over two-month high. The rose 0.1% as data showed the country’s grew more than expected in the second quarter.
Fed rate hike priced in, outlook uncertain
The Fed is widely expected to at the conclusion of a two-day meeting on Wednesday. While the hike appears to be largely priced in by markets, traders remained uncertain over what the Fed may signal.
U.S. inflation still remains well above the central bank’s target range, which could see the Fed stick to its plan for at least one more hike this year after Wednesday’s move.
But show that markets are pricing in the chance that the bank will keep rates steady for the remainder of the year.
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