New Delhi, July 29 : Most Asian currencies lost steam on July 29 as the dollar strengthened on the back of strong US GDP data and investors remained cautious ahead of this week’s Federal Reserve meeting where a rate cut has been largely priced in.
Investors will also be watching the resumption of Sino-US talks as the world’s top two economies make yet another attempt to resolve their differences on trade and other issues that have roiled financial markets for over a year now.
The dollar clung to a two-month high against a basket of currencies in Asia after better-than-expected US GDP data last week enhanced its yield attraction against rival currencies.
The Fed is widely expected to cut interest rates for the first time in more than a decade in its July 30-31 meeting, a move broadly seen as a pre-emptive one to protect the economy from global uncertainties and trade pressures.
“The elephant in the room for this week is the Fed…a 50 basis points rate reduction seems unlikely now,” said Maybank analysts in a note.
US and Chinese trade negotiators meet in Shanghai for their first in-person talks since a G20 truce last month, but expectations are low for a breakthrough.
The Chinese yuan weakened as much as 0.2% to hit its lowest against the dollar in more than five weeks.
Data on Saturday showed profits earned by China’s industrial firms contracted in June after a brief gain the previous month, fuelling concerns that a slowdown in manufacturing from a bruising trade war will drag on economic growth.
The Indonesian rupiah, the Indian rupee, the Malaysian ringgit and the Singapore dollar slipped as much as 0.1%.
The Korean won and the Taiwan dollar were little changed.
The Philippine peso was the only currency that showed some relative strength, putting on as much as 0.3% to touch a more than one-week high.
Thai financial markets were closed for a holiday.
