Asia FX muted as dollar recovers; euro shaken by elections By Investing.com

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Investing.com — Most Asian currencies retreated Monday as the dollar rallied after an explosive nonfarm payrolls report rekindled fears of high longer-term interest rates in markets.

The dollar also benefited from a decline in the , which hit a one-month low amid political uncertainty after European Union election results showed a broad move toward right-wing parties.

French President Emmanuel Macron called for early parliamentary elections later in June after his party was defeated in the EU vote by Marine Le Pen’s far-right party.

Regional trading volumes were limited due to market holidays in China, Hong Kong and Australia.

Dollar strong thanks to Fed meeting, CPI data available

Trading in Asia advanced on Monday, continuing strong gains from Friday after a strong report.

The reading saw traders lower expectations for a .

The payroll data came just days ahead of this week, when the central bank is widely expected to leave interest rates unchanged. But any signals about future interest rate decisions will be closely watched.

Key inflation data is also available this week, due out on Wednesday. Inflation is expected to show inflation remaining well above the Fed’s 2% annual target.

Uncertainty over the Fed meeting and interest rates negatively impacted most Asian currencies.

The Japanese yen weakens despite an improvement in GDP

The Japanese yen weakened on Monday, with the pair rising 0.3% and breaking past the 157 level again.

The yen’s weakness came even as data showed Japan’s economy contracted slightly less than expected in the first quarter.

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But the economy still continued to contract completely.

The GDP data came just ahead of later this week, when the central bank is expected to start tightening policy by reducing asset purchases.

But the extent to which the BOJ can tighten policy remains uncertain given that the economy remains weak.

Other Asian currencies weakened. The South Korean won pair was flat, while the Singapore dollar pair rose 0.2%.

The Indian rupee’s pair was flat around the mid-83s but remained within sight of a record high after falling sharply last week.

The Australian dollar pair rose 0.1% in holiday-thin trading, while the Chinese yuan pair rose 0.1%.

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