Exchange rates muted in Asia, dollar retreats with focus on Israel-Hamas war By

3 Min Read — Most Asian currencies fell slightly on Monday, while the dollar retreated from recent highs, as investors continued to worry about a possible spillover from the war between Israel and Hamas.

Interest in risk-driven Asian currencies remained fragile, while the dollar saw some profit-taking after closing close to a 10-month high last week. Fears of higher US yields following strong inflation in September kept sentiment towards Asian markets largely negative.

The focus this week is also on a series of key economic indicators from China and Japan. The figures fell 0.1%, with third quarter data due later in the week.

The data is expected to show continued weakness in Chinese economic growth, as business activity remained subdued despite the lifting of anti-COVID measures at the start of the year.

The People’s Bank of China will also decide on the key this week, although a change appears unlikely after the PBOC kept medium-term loan rates unchanged.

Rates rose slightly and remained just below the 150 level, which investors say will attract Japanese government intervention in the currency markets. The focus this week is on the Japanese figures, and more importantly, on the September figures.

Any persistence in inflation gives the Bank of Japan more impetus to tighten monetary policy – ​​a scenario that could support the yen.

Recent weakness in oil prices contributed to the 0.1% rise, while markets also awaited data due later in the day.

Yields rose 0.4%, recovering from a 10-month low, although sentiment towards the currency remained dampened by weakness in commodity prices.

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The dollar sees demand for safe havens as tensions persist in the Middle East

The and both fell about 0.1% each in Asian trading on Monday, with some gains taken. But a surge in demand for safe-haven assets in the wake of the Israel-Hamas war kept the dollar near a 10-month peak.

Israel is about to launch a ground attack on the Gaza Strip, a move that could mark an escalation of the conflict and potentially attract more Middle Eastern countries. But US officials said such a scenario seemed unlikely.

The rate stabilized on Monday, after falling almost 4% against the dollar in the past two weeks.

The dollar was also boosted by expectations of higher US interest rates as recent data showed consumer inflation and sentiment remained robust. The focus this week is also on a series of speakers from the Federal Reserve, as well as more US economic talks.

US yields are likely to remain higher for even longer, putting pressure on Asian markets as the gap between high-risk and low-risk returns continues to narrow.

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