Investing.com-- Most Asian currencies tread water on Monday as an unexpected interest rate cut in China offered little cheer, while the dollar crept lower after President Joe Biden said he will no longer seek reelection.
Biden endorsed Vice President Kamala Harris, who is now likely to face off against Republican frontrunner Donald Trump in the presidential race.
Biden’s move ramped up uncertainty over the upcoming presidential elections, which in turn soured sentiment towards risk-driven markets. This, coupled with concerns that a potential Trump presidency could also entail more clashes with China, weighed on regional currencies.
Dollar edges lower after Biden news, rate cuts in focus
The dollar index and dollar index futures both fell 0.1% each in Asian trade, amid uncertainty over the U.S. political outlook.
Trump was seen polling ahead of both Biden and Harris, CBS data showed last week. Analysts expect a Trump presidency to potentially yield higher inflation, especially if he proceeds with stricter trade restrictions and higher import tariffs against China.
But Harris is now expected to provide a greater challenge to Trump, especially as reports showed all state Democratic party chairs had endorsed Harris. Democratic fundraising also topped $50 million after Biden’s endorsement of Harris.
The dollar had advanced last week amid speculation over the 2024 election. But gains in the greenback were still largely held back by increased bets that the Federal Reserve will begin cutting interest rates from September.
This notion had battered the dollar in early-July, and also offered some relief to Asian markets.
Chinese yuan near 8-mth low after surprise loan prime rate cut
The Chinese yuan weakened on Monday, with the USDCNY pair rising 0.1% to 7.2729, nearly reaching levels last seen in November.
Weakness in the yuan came after the People’s Bank of China unexpectedly cut its benchmark loan prime rate to further loosen monetary policy and support the economy.
The cut comes as China struggles with a slowing economic recovery- concerns over which have added to mounting pressure on the yuan.
Recent weakness in the yuan also came amid concerns over a Trump presidency, given that Trump has maintained a negative rhetoric towards Beijing.
Broader Asian currencies moved in a flat-to-low range, weighed by uncertainty over U.S. politics. The Japanese yen’s USDJPY pair was flat around 157.44 yen, after seeing wild swings last week amid suspected intervention by the government.
The Australian dollar’s AUDUSD pair fell 0.2%, while the Singapore dollar’s USDSGD pair was flat.
The South Korean won’s USDKRW pair rose slightly, while the Indian rupee’s USDINR pair fell 0.1% after surging to record highs last week.