Investing.com– Most Asian currencies weakened on Tuesday, while the dollar steadied at an over two-month high amid persistent bets that the Federal Reserve will cut interest rates at a slower pace. 

Comments from Fed officials furthered this notion, especially as recent data showed resilience in U.S. inflation and the labor market. Traders were seen positioning for a smaller rate cut in November.

Sentiment towards Asian markets was dampened by waning cheer over recent stimulus measures from China, especially as Beijing left out key details from a briefing on planned fiscal measures. The yuan weakened further on Tuesday. 

Dollar steady near 2-mth high 

The and fell slightly in Asian trade after hitting a two-month high on Monday. 

The greenback found its footing in recent weeks as U.S. labor and inflation readings spurred bets on a slower pace of rate cuts by the Fed.

Fed Governor Christopher Waller furthered this notion on Monday, calling for “more caution” on future rate cuts. Waller said that the central bank should only gradually cut rates in the coming months. 

The Fed had cut rates by 50 basis points in September and announced the start of an easing cycle, although it had also maintained a largely data-driven approach to future easing.

Traders were seen pricing in an 86.8% chance for a 25 basis point cut in November, and a 13.2% chance rates will remain unchanged, showed.

Most Asian currencies weakened over the past two weeks on this notion, and were mostly negative on Tuesday. The Japanese yen’s pair fell slightly, but was close to breaking above 150 yen.

The Australian dollar’s pair fell marginally, but was nursing losses in recent sessions tracking weakness in commodity prices. 

The South Korean won’s pair rose 0.3% after the Bank of Korea cut interest  rates last week, while the Singapore dollar’s pair rose slightly.

The Indian rupee’s pair remained close to record highs of 84 rupees, even as inflation data for September read hotter than expected.

Chinese yuan weakens as stimulus cheer wanes 

China’s yuan was among the worst performers on Tuesday, with the pair rising 0.3% to a near one-month high.

Sentiment towards the yuan remained flighty as traders were only marginally impressed by China’s plans to dole out fiscal stimulus. The Ministry of Finance also did not provide key details on the planned measures- specifically their scale and timing. 

Sentiment towards China was also dented by a string of weak economic readings. Data on Monday showed China’s shrank more than expected in September amid a sharp slowdown in growth, while earlier readings showed a disinflationary trend remained in play. 

By Gertrude Chavez-Dreyfuss and P.J. Huffstutter

NEW YORK (Reuters) -The U.S. dollar touched a 10-week high on Monday in thin trading, extending its weeks-long bullish run sparked by data showing a modestly slowing economy that lined up with bets for moderate interest rate cuts by the Federal Reserve.

Volume was light with several markets, including Japan and Canada, closed on Monday. The U.S. bond market is shut for Indigenous Peoples’ Day.

The greenback rose against the Chinese yuan after China’s weekend stimulus announcements disappointed investors.

The , a gauge of the greenback’s value against six major currencies, rose to 103.36, the highest since Aug. 8. It was last up 0.2% at 103.23, while the euro dropped to a 10-week low below $1.09, and was last down 0.3% at $1.0902.

The European Central Bank is expected to lower rates this week, but the Fed remains the market’s focus. The U.S. rate futures market has priced in an 87% chance the Fed will ease by 25 bps at the November meeting, and a 13% chance it will pause and keep the fed funds rate at the target range between 4.75% and 5%, according to LSEG estimates.

The Fed slashed interest rates by an aggressive 50 basis points at its last policy meeting about four weeks ago.

For the rest of the year, the futures market expects about 45 bps in cuts and another 98.5 bps in rate reductions for 2025. That was way down from the roughly 200 bps in cuts that the market implied before the September Fed meeting and the blockbuster U.S. nonfarm payrolls report that reset easing expectations to a much shallower cycle than previously thought.

Expectations for smaller interest rate cuts have supported the dollar in the last few weeks, but that adjustment is likely on its last legs, analysts said.

“I suspect that it’s (rate adjustment) almost over and we’re back on the downtrend. But I do think there is still one more gasp,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

“We might trigger stops at $1.09 in the euro, or $1.30 in sterling. But I am looking ahead and the next U.S. jobs data is about 120,000. It’s going to be a weak number.”

Minneapolis Fed President Neel Kashkari on Monday reinforced the market’s thinking on the U.S. central bank’s easing policy.

“As of right now, it appears likely that further modest reductions in our policy rate will be appropriate in the coming quarters to achieve both sides of our mandate,” Kashkari said in a speech at a Central Bank of the Argentine Republic conference, referring to the Fed’s mission of keeping unemployment and inflation low.

ECB MEETING

In the euro zone, the euro fell for the 11th time in 12 sessions as investors moved to price in a 25 bp interest rate cut from the ECB with near-certainty at its Thursday meeting as data pointed to deteriorating euro zone activity.

Current indicators indicate continued weakness in the German economy in the past quarter, the economy ministry said in its monthly report on Monday.

Meanwhile, credit ratings agency Fitch revised France’s outlook to “negative” from “stable” on Friday, citing increases in fiscal policy and political risks.

The pound dipped 0.1% against the dollar to $1.3054. 

Against the yen , the dollar climbed to its highest since early August to 149.96 yen in thin trading, as Japanese markets were shut for a bank holiday. It was last up 0.5% at 149.89 yen.

Next on the market’s radar are U.S. retail sales and jobless claims data, and the ECB’s policy review, all due on Thursday.

In Asia, trading was dominated by Beijing’s fiscal stimulus briefing. China’s fell 0.3% against the dollar, and was last at 7.0906.

Without quantifying the proposed fiscal stimulus, Finance Minister Lan Fo’an told a press conference there will be more “counter-cyclical measures” this year.

“China’s weekend stimulus announcement proved underwhelming as policymakers demonstrated an increased commitment to supporting growth, but failed to deliver the hard numbers markets had been hoping for,” said Karl Schamotta, chief market strategist, at Corpay in Toronto.

The has fallen nearly 1% against the dollar since Sept. 24, when the People’s Bank of China kicked off China’s most aggressive stimulus measures since the pandemic.

In digital currencies, bitcoin rose to a two-week high and was last up 4.6% at $65,881. Ether surged 7% to $2,629 also touching a two-week peak earlier in the session.

Currency              

bid

prices at

14

October​

07:07

p.m. GMT

Descripti RIC Last U.S. Pct YTD Pct High Low

on Close Change Bid Bid

Previous

Session

Dollar 103.25 103.04 0.21% 1.85% 103.36 102.

index 96

Euro/Doll 1.09 1.0936 -0.32% -1.25% $1.0937 $1.0

ar 888

Dollar/Ye 149.79 149.17 0.38% 6.16% 149.945 149.

n 16

Euro/Yen 1.09​ 163.09 0.12% 4.92% 163.6 162.

9

Dollar/Sw 0.863 0.8574 0.68% 2.57% 0.864 0.85

iss 8

Sterling/ 1.3052 1.3067 -0.09% 2.59% $1.307 $1.3

Dollar 031​

Dollar/Ca 1.3796 1.3763 0.27% 4.11% 1.3805 1.37

nadian 64

Aussie/Do 0.6719 0.6751 -0.46% -1.44% $0.6793 $0.6

llar 703

Euro/Swis 0.9407 0.9374 0.35% 1.3% 0.9427 0.93

s 71

Euro/Ster 0.835 0.8368 -0.22% -3.67% 0.8373 0.83

ling 49

NZ 0.6087 0.6109 -0.33% -3.65% $0.6102 0.60

Dollar/Do 71

llar

Dollar/No 10.7931​ 10.6844 1.02% 6.49% 10.7985 10.7

rway 123

Euro/Norw 11.7654 11.6887 0.66% 4.82% 11.781 11.7

ay 044

Dollar/Sw 10.4303 10.3569 0.71% 3.61% 10.4417 10.3

eden 77

Euro/Swed 11.369 11.3313 0.33% 2.2% 11.3905 11.3

en 391