Investing.com-- Most Asian currencies weakened on Monday, while the dollar firmed slightly amid little relief from persistent uncertainty over a dire trade war between the U.S. and China.
Traders largely digested mixed signals on trade talks from Washington and Beijing, with comments from Treasury Secretary Scott Bessent adding to doubts that negotiations were taking place.
Most regional currencies were nursing steep losses in recent weeks, as risk appetite deteriorated amid few signs of a U.S.-China deescalation.
The Japanese yen was an exception to this trend, as it benefited from increased safe haven demand. But the yen faces a crucial test this week with a Bank of Japan meeting.
Dollar creeps higher amid differing signals on China trade talks
The dollar index and dollar index futures both rose about 0.2% in Asian trade, but remained close to a three-year low hit earlier in April.
The greenback was battered by heightened concerns over the U.S. economy under Trump’s trade agenda, with a recent sell-down in Treasuries also reflecting broader market anxiety.
Bessent on Sunday said he did not know whether Trump had spoken to Chinese President Xi Jinping over the trade war, and that recent dialogue with Chinese officials had taken place under the International Monetary Fund, and not as trade negotiations.
Bessent’s comments added to more doubts over Trump’s claims that trade talks with China were taking place- a claim that Beijing had categorically denied.
The differing signals, coupled with Trump’s tendency to flip-flop on his tariff plans, kept markets largely on edge.
Bessent’s comments also came before a May 2 deadline for an end to de minimis exemptions on cheap Chinese imports.
Chinese yuan weakens, losses limited by stronger fix
The Chinese yuan weakened on Monday, with the USD/CNY pair rising 0.1%. But further weakness in the yuan was limited by a stronger midpoint fix from the People’s Bank.
China had doled out a series of weaker midpoint fixes through April, as it sought to weaken the yuan and bolster its exports in the face of steep U.S. tariffs.
Chinese officials said on Monday that they will dole out more economic support, and that they were confident the country will achieve the government’s 5% annual growth target.
Focus this week is on key Chinese purchasing managers index data for April, which is set to provide more insight into the impact of a bitter tariff exchange with the United States.
Broader Asian currencies moved in a flat-to-low range, as ructions between the world’s biggest economies kept traders risk-averse.
The Japanese yen firmed slightly, with the USD/JPY pair falling 0.1%. Focus this week is squarely on a BOJ meeting, with the central bank expected to keep rates unchanged. Traders will be watching just what the BOJ will signal for future policy, as it navigates an environment of rising domestic inflation and heightened global trade uncertainty.
The Australian dollar’s AUD/USD pair fell 0.1% ahead of key quarterly inflation data due later this week. The South Korean won’s USD/KRW pair rose 0.2%, while the Singapore dollar’s USD/SGD pair fell 0.1%.
The Indian rupee’s USD/INR pair was steady around 85.35 rupees, after falling sharply from record highs over the past two months.