Investing.com– Most Asian currencies remained in a tight range on Monday as sentiment in the region deteriorated on faint data on economic activity in China and the dollar fell amid growing bets on an interest rate cut.

A pointed downward revision to Japan’s gross domestic product for the first quarter also resulted in sentiment towards Asia remaining rather negative, while the yen remained breakable and largely focused on potential government intervention.

Weak Chinese Yuan, PMIs Give Mixed Signals

The Chinese yuan remained faint on Monday, with the currency pair holding on to levels last seen in November.

Purchasing Managers’ Index data painted a mixed picture of the economy. Data released Sunday showed China’s manufacturing sector contracted for a second straight month in June.

However, it showed that the sector is growing at the fastest pace in three years.

The mixed signals came amid a deterioration in sentiment towards China, as volatility in trade with the West and fading optimism over stimulus measures kept selling pressure on the yuan’s high.

Broader Asian currencies, especially those with exposure to China, were trading in a tight range. The Australian dollar pair remained unchanged, while the Singapore dollar pair and the South Korean won pair strengthened slightly.

The Indian rupee pair saw some strengthening last week and remained below its record levels from June.

Japanese Yen Fragile, USDJPY Rising After GDP Revision

The Japanese yen remained at a 38-year low. It rose to 161.19 yen on Monday and remained well above levels that prompted government intervention in May.

The Japanese government on Monday unexpectedly revised down its first-quarter data, with the reading now indicating a much deeper contraction than initially expected.

The reading painted a bleak outlook for the Japanese economy and raised questions about how much room the Bank of Japan has to start tightening policy.

This concept has been a key influence on the yen, with recent dovish signals from the Bank of Japan being a key driver of the currency’s decline in June.

The dollar is retreating, further signals on interest rates are expected

Both indices fell more than 0.2% on Monday, extending losses from Friday after data was released that showed a slight slowdown in inflation.

Investors increased their bets that the Federal Reserve will cut interest rates by 25 basis points in September, according to the reading.

The focus this week has been mainly on more signals from the Fed. Chairman Jerome Powell is scheduled to speak on Tuesday, and meetings are scheduled for Wednesday.

Data for June will be published on Friday.