© Reuters. FILE PHOTO: Euro, Hong Kong dollar, U.S. dollar, Japanese yen, pound and Chinese 100 yuan banknotes are seen in this picture illustration
By Tom Westbrook
SINGAPORE (Reuters) – The dollar slipped and yen and yuan led Asia’s currencies a little higher on Monday, as investors looked ahead to a slew of U.S. Federal Reserve speakers this week and to a decision on the inclusion of Chinese government bonds in a global index.
Moves were slight and volumes light due to a public holiday in Japan. The , which tracks the greenback against a basket of six major currencies, dipped 0.2% to 92.779.
The yen and yuan rose about 0.3% each, with the yen
Foreigners’ Chinese bond buying has helped put the yuan on a tear, lifting it nearly 6.5% in four months.
Investors are expecting Russell will include China in its World Government Bond Index <.sbwgu> on Thursday, likely triggering even more inflows and supporting the currency.
“The assets under management tracking this index is big…so we are seeing some pre-positioning taking place,” said Bank of Singapore currency analyst Moh Siong Sim.
“But it’s not just the index, the bigger picture here is that the (Chinese) economy is doing well, there’s an interest-rate differential that is supporting the currency and a Biden victory (at the U.S. election) might provide further relief.”
The yuan edged back toward last week’s 16-month high in Asia, rising to 6.7570 in onshore trade
The Taiwan dollar
The euro and sterling crept toward the top of ranges they have occupied for a couple of weeks, with the euro () last at $1.1867 and sterling
The yen looked to break new ground, extending a week of solid gains amid trepidation about the global economic outlook and perhaps a shift in the yen’s drivers as central banks pin rates around the world at or below zero.
The yen is up nearly 2% in five consecutive weeks of gains.
“The yen is deeply undervalued on standard metrics, private sector portfolio outflows appear to have slowed, and the Bank of Japan seems to have little appetite for more deeply negative rates,” Goldman Sachs (NYSE:) analysts said in a note.
“For these reasons we see downside risk to our 12-month dollar/yen target of 105.”
In the short term, analysts said the Fed’s lower-for-longer commitment on rates would drag on the dollar, though close attention will be paid to remarks from committee members this week for any more clues on the new approach to inflation.
Fed Chairman Jerome Powell is due to appear before Congressional committees later this week while Fed committee members Lael Brainard, Charles Evans, Raphael Bostic, James Bullard, Mary Daly and John Williams (NYSE:) also make public speeches.
“The dovish Fed will remain a background negative for the dollar,” said Terence Wu, strategist at Singapore’s OCBC Bank.
“Powell’s testimony (on Tuesday) will draw attention, but for now the Fed is likely done playing their cards.”
Asia’s laggard was the New Zealand dollar