Investing.com– Most Asian currencies weakened slightly on Friday as the dollar retained a bulk of its weekly gains on expectations of a slower pace of interest rate cuts by the Federal Reserve.

The Japanese yen steadied near its weakest level in three months as Japan geared up for a tightly contested general election over the weekend, while verbal warnings on potential currency market intervention also kept traders skittish towards the currency.

Most Asian currencies were nursing losses this week as a mix of factors dented risk aversion, although the yen- traditionally a safe haven- was the worst performer this week.

USDJPY steadies near 152 with election, intervention in focus 

The yen’s pair steadied near thee-month highs around 152 yen, and was headed for a 1.6% gain this week- its fourth consecutive week of gains. 

Sentiment towards Japanese markets was largely on edge before a general election on Sunday, where local polls showed an alliance led by the ruling Liberal Democratic Party could struggle to reach a majority.

This could lead to Prime Minister Shigeru Ishiba facing an uphill battle to enact more economic reforms, while increased political uncertainty is also expected to undermine expectations for more interest rate hikes from the Bank of Japan.

Consumer inflation data from Tokyo showed inflation eased slightly less than expected in October, but fell below the BOJ’s 2% annual target. The data usually heralds a similar reading from nationwide inflation data. 

The yen saw some strength after government officials kept up their warnings of potential intervention in the currency market, given recent weakness in the yen. 

Dollar set for fourth week of gains 

The and steadied in Asian trade, and were headed for a fourth straight week of gains. The greenback was trading up about 0.6% this week.

In addition to bets on smaller rate cuts, the dollar was also buoyed by increasing bets that Donald Trump will win the 2024 presidential elections. Recent polls and online prediction markets put Trump ahead of Democratic nominee Kamala Harris.

Trump’s policies are expected to be inflationary, presenting a higher outlook for U.S. rates in the long term. 

Concerns over stickier U.S. interest rates sparked weakness in Asian markets, with most regional currencies headed for weekly declines. 

The Chinese yuan’s pair rose 0.1% on Friday and was set to rise 0.3%. A meeting of China’s National People’s Congress, initially slated to take place in late-October, now appeared to be delayed to November. 

The Australian dollar’s {{|AUDUSD}} pair fell 0.3% on Friday, while the South Korean won’s pair surged 0.7%.

The Singapore dollar’s pair rose 0.2%, while the Indian rupee’s pair hovered close to record highs.

Investing.com – The U.S. dollar held largely steady Friday, on course for a fourth straight week of gains, underpinned by falling expectations of aggressive Fed rate cuts as well as heightened political uncertainty.

At 04:25 ET (08:25 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded marginally lower at 103.880, still on track for a weekly gain of around 0.6%. 

Dollar steadies ahead of payrolls

The dollar has steadied Friday after a slight fall in the previous session on the back of lower U.S. Treasury yields.

However, it has generally been in demand for much of the month as reasonably healthy economic data has seen the market scale back expectations of more hefty rate cuts by the Federal Reserve in the near future.

This relative calm could disappear next week, with a highly consequential U.S. report due next Friday.

However, ahead of this release, the focus may well be on the upcoming US presidential election, as market bets for a possible return of Donald Trump ramp up.

“The polls are clearly telling us the election is too close to call, but markets and betting odds are leaning increasingly in favour of Trump,” said analysts at ING, in a note. 

“This may be due to the experience of the past two elections, where Trump was underestimated by polls, but also by greater hedging demand for a Trump presidency, which is seen as a more impactful macro/market event due to protectionism, tax cuts, strict migration policies and risks to the Fed independence.”

ECB to consider large cut?

In Europe, edged marginally higher to 1.0833, on track for a weekly loss of more than 0.3%.

The rose slightly in October, data showed Friday, but sentiment remains weak after eurozone business activity stalled again this month.  

The has already cut rates three times this year, each time by 25 basis points, but expectations are growing that the central bank will consider a larger reduction at its next meeting.

“Bundesbank president Joachim Nagel was asked on two separate occasions during his stay in Washington whether he would consider a 50bp cut in December, and both times, he refrained from explicitly pushing back,” said ING. “Nagel is one of the most hawkish members of the Governing Council and would have probably answered with a clearer ‘no’ only a month ago.”

traded largely unchanged at 1.2972, heading for a weekly loss of around 0.5%, but has also edged away from a two-month low seen on Wednesday. 

Bank of England Governor speaks on Saturday in Washington, and traders will be looking for any comments on likely future policy after he warned earlier this month that the central bank could become “a bit more activist on rate cuts” if there’s further good news on inflation.

Yen looks to weekend’s election

rose 0.1% to 152.02, steadied near three-month highs, with the pair headed for a 1.6% gain this week – its fourth consecutive week of gains. 

Sentiment towards Japanese markets was largely on edge before the general election on Sunday, where local polls showed an alliance led by the ruling Liberal Democratic Party could struggle to reach a majority.

This could lead to Prime Minister Shigeru Ishiba facing an uphill battle to enact more economic reforms.

edged higher to 7.1209, trading in a tight range with a meeting of China’s National People’s Congress, initially slated to take place in late-October, now appearing to be delayed to November.

Investing.com – The U.S. dollar slipped slightly lower Thursday, but remained close to three-month highs underpinned by expectations for a slower pace of interest rate cuts by the Federal Reserve ahead of the upcoming US presidential election.

At 04:05 ET (08:05 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% lower to 104.095, not far removed from levels last seen at the end of July. 

Beige Book helps the dollar 

The dollar has been in demand as recent economic data has pointed to the US economy holding up reasonably well, suggesting that the Federal Reserve can be less aggressive in its easing than had previously been expected.

The Federal Reserve’s , released Wednesday, said that economic activity was little changed since early September, while the labor market continued to show signs of strength.

The unchanged outlook on the economy comes amid a string of stronger economic data released recently, including the stronger September jobs report and retail sales.

Markets are currently pricing in just short of 50 basis points of cuts for the rest of the year, pointing to a likely cut of 25 bps in November.

Also helping the US currency is the proximity to the U.S. presidential election, as investors are also increasingly positioning ahead of the poll early next month. 

“Volatility will probably rise into the 5 November election,” said analysts at ING, in a note, “and assuming that Donald Trump continues to perform well in the polls, the dollar should stay bid.”

Euro gains after PMI data

In Europe, edged 0.2% higher to 1.0797, with traders digesting the latest economic activity data from the eurozone region.

The news remained grim, with the release falling to 47.3 in October from 48.6 in September, but the offered some hope, with the country’s composite PMI release rising to 48.4 in October, up from 47.5 the previous month and the expected 47.6.

While below 50, and thus still in contraction territory, the data pointed to an improvement in the region’s most important economy.  

That said, the has already cut rates three times this year from a record high, and further easing at each of its upcoming meetings this year looks likely.

“With inflation in abeyance and business confidence low, this is fertile ground for the ECB doves,” said ING. “We tentatively see something like a 1.0765-1.0850 EUR/USD range for the time being.”

rose 0.3% to 1.2961, bouncing after the pair dipped to a more than five-week low of in the previous session, ahead of the release of the October UK PMI data. 

Yen receives support

fell 0.4% to 152.19, slipping back slightly after climbing to a near three-month high in the prior session.

The yen saw some support after Japanese government officials warned against “one-sided” moves in currency markets, in light of recent weakness in the yen. Their comments spurred some fears of currency market intervention.

fell 0.2% to 7.1111, with the yuan recovering slightly from a near two-month high hit earlier this week, with the focus turning to an upcoming meeting of China’s National People’s Congress for more cues on fiscal spending.