According to Lao Dong, on October 28, the Japanese Yen (JPY) recovered, leading the increase in the region after major losses in recent sessions. The USD/JPY pair fell 0.3% compared to the previous session.
Most Asian currencies rose slightly on Tuesday thanks to optimism about improved US-China trade relations. The development comes ahead of a scheduled meeting between US President Donald Trump and Chinese President Xi Jinping in South Korea this weekend to discuss further a framework deal.
However, the US dollar fell slightly as the market awaited a widely predicted interest rate cut from the US Federal Reserve (Fed). The US dollar index and the US dollar futures both fell about 0.1% on Tuesday.
The market is waiting for news from the Fed and BoJ. Market attention today is also focused on the meeting between Japanese Prime Minister Sanae Takaichi and US President Donald Trump.
Although the Yen has recovered this session, concerns about Japan's fiscal policy under Ms. Takaichi - who is said to be pursuing an expansionary economic stimulus policy - remain.
This creates a contradiction with September service inflation data ( released yesterday, October 27) which is reinforcing the possibility that the Bank of Japan (BoJ) will soon raise interest rates, as inflation has exceeded the long-term target of 2%.
On the US side, the market is almost certain that the Fed will cut interest rates by at least 25 basis points at the end of the two-day meeting on Wednesday (October 29). This confidence is reinforced by weak consumer inflation data released last week (show of cooling September inflation) and broader uncertainties in the US economy, including a cooling labor market.
The contrast between the policies of the BoJ (expected to tighten) and the Fed (expected to loosen) has caused the Yen's performance to fluctuate strongly this week, as both central banks announce policy decisions.
In other developments, the Korean Won (KRW) fell behind, with the USD/KRW exchange rate rising 0.4%, despite the country's third quarter GDP growth data being higher than expected. In contrast, the Chinese yuan (CNY) increased in value, causing the USD/CNY pair to decrease by 0.1% as the meeting between Mr. Trump and Mr. Tap was approaching.
