Most Asian currencies were largely unchanged on Monday amid light trading volumes, as many market participants stayed on the sidelines ahead of a summit between U.S. President Donald Trump and Chinese President Xi Jinping in Washington later in the week.
Several major markets observed public holidays that thinned liquidity. Japanese markets were closed on Monday and will remain shut through much of the week. Chinese and South Korean exchanges are also scheduled to be closed later in the week, further limiting trade flows across the region.
Markets registered little reaction to a further decline in oil prices, which extended losses from the prior week after President Trump signaled he was open to meeting Iranian counterpart Masoud Pezeshkian on the sidelines of a United Nations summit in New York this week, even as tensions in the Middle East remained elevated.
The Japanese yen was mostly flat on Monday. The USD/JPY pair hovered near 157 yen following a Bank of Japan interest rate increase on Friday that offered only limited support for the currency. That 25 basis point move had been widely anticipated, and subsequent BOJ commentary came across as less hawkish than some market participants expected because the central bank stopped short of indicating additional rate increases in coming months.
The dollar firmed slightly overall. The dollar index and dollar index futures each rose about 0.1% on Monday, extending gains after the greenback added more than 1% in the prior week. The dollar's improvement has been supported by the Federal Reserve's interest rate hikes and its reiterated 2% annual inflation target, a stance that the market interprets as consistent with the potential for further monetary tightening.
Focus this week is squarely on the forthcoming meeting between President Xi and President Trump. Trade tariffs and artificial intelligence are expected to be prominent topics on the agenda. U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng began preparatory talks in New York on Sunday to shape the summit agenda. Bessent told reporters the discussions included plans for a new U.S.-China notification system for artificial intelligence to set common aims and identify risks.
On trade, the leaders are widely expected to extend their existing trade truce, which is due to expire in early-November.
The Chinese yuan was little changed after the People's Bank of China left benchmark lending rates broadly unchanged, as expected. The PBOC kept its one-year loan prime rate at 3.00% and its five-year loan prime rate at 3.50%, levels the central bank has maintained as part of measures to bolster local loan demand and spending. Those low rates have had limited impact on the yuan, which previously reached a four-year high in September amid a series of firm midpoint fixes by the PBOC.
Across the wider region, currency moves were modest and trading volumes are expected to remain subdued for the balance of the week due to the sequence of holidays. The Singapore dollar's USD/SGD pair changed little. The South Korean won's USD/KRW pair declined by about 0.16%. The Australian dollar's AUD/USD pair was essentially flat, while the Indian rupee's USD/INR pair also slipped roughly 0.16%.
Market context and sector considerations
Currency markets are navigating a mix of central bank signals, geopolitical expectations tied to the U.S.-China summit, and shifting oil prices. Energy markets and trade-sensitive sectors may be particularly attentive to developments that could emerge from the summit and to any further changes in oil dynamics related to remarks on Iran.