Asian currency markets opened the week with mixed returns, led by the Chinese yuan keeping close to a more-than four-year peak and the U.S. dollar largely steady as investors positioned for the U.S. midterm elections and a busy slate of central bank decisions and economic releases.
The U.S. dollar index rose 0.1% to 101.94. In individual pairs, USD/JPY climbed 0.2% to 157.88, leaving the Japanese yen marginally softer. EUR/USD inched up 0.1% to 1.1169, still trading near a 17-month low of 1.1159 touched earlier. GBP/USD was little changed, quoted around 1.3386 in recent trade and about $1.3387 in earlier sessions.
The euro has remained on the defensive after Fitch on Friday revised France's credit outlook to negative from stable, citing deteriorating debt dynamics. Sterling showed minimal movement around the levels noted above.
The Chinese currency held firm. Offshore USD/CNH was at 6.6523 and onshore USD/CNY at 6.6540. Onshore trading moved as strong as 6.659 per dollar on Friday, its strongest reading since June 6, 2022. The yuan has appreciated roughly 5% against the dollar so far this year and was on track for a fourth straight monthly gain, supported in part by exporters converting dollar receipts back into yuan.
Market attention was concentrated on Tuesday's U.S. midterm elections, which will decide control of Congress and could affect the trajectory of government spending and federal borrowing. The market consensus reflected in positioning was that Democrats were widely expected to retain control of the House of Representatives, while the Senate races remained more uncertain. Analysts cited the potential for heightened debate over the U.S. debt ceiling in the period ahead. October employment data due on Friday was also highlighted as a key input for expectations about the Federal Reserve's next policy decision.
Central banks were in focus after a number of major institutions left rates unchanged last week. The Federal Reserve, European Central Bank, Bank of Japan and Reserve Bank of New Zealand all held policy rates steady, joining the Bank of Thailand in pausing. The BOJ's action followed an 8-1 vote to hold rates at 1.25%, while the RBNZ's unexpected decision to keep its rate at 2.75% weighed on the New Zealand dollar, which fell 1.2% last week.
In Australia and New Zealand, currency moves reflected upcoming and recent policy decisions. AUD/USD slipped 0.1% to $0.7024 ahead of Tuesday's Reserve Bank of Australia decision, where markets widely expected the cash rate to be raised to 4.85%. NZD/USD declined 0.3% to $0.5614, extending pressure after the RBNZ surprise mentioned above. The Bank of England, and the central banks of Norway and Sweden, were also scheduled to announce policy decisions this week. In Asia, Bank Negara Malaysia was expected to keep its rate unchanged at 2.75% on Thursday.
Elsewhere in the region, the South Korean won showed a relatively sharp move weaker. USD/KRW rose 0.7% to 1,342.83 amid volatile foreign investment flows and questions over the sustainability of a rally in the country's equity market, which has been concentrated in semiconductor and AI-related stocks. The longer-term durability of those inflows remained an open topic for investors.
Policy and market mechanics also featured in recent yuan pricing. The People's Bank of China set Friday's midpoint at 6.7138 per dollar, its strongest fixing since February 2023, though the midpoint was noticeably weaker than some market estimates. On the data front, Monday's private-sector RatingDog survey indicated continued expansion among manufacturers and stronger factory output, providing some support for the yuan after a contraction in the official manufacturing PMI.
Region-wide data to watch this week included inflation readings from Taiwan, Thailand and the Philippines, which could clarify local price pressures. On trade and growth, DBS was cited as expecting South Korean exports to accelerate year-on-year in October with a trade surplus forecast at $43 billion. DBS also saw Indonesia's third-quarter growth easing to 5.2% from 5.3%.
Other currency moves reported on Monday included USD/IDR rising 0.4% to 18,171, USD/SGD advancing 0.2% to 1.2795, and USD/MYR climbing 0.3% to 4.0665.
With multiple central bank meetings, key economic data releases and the U.S. political calendar all converging, market participants remained attentive to shifts in flows and policy signals that could alter the momentum in Asian currencies and global FX markets through the rest of the week.