Investing.com – Most Asian currencies were little changed on Thursday as modest dollar consolidation provided some relief, while the Japanese yen strengthened as expectations of government intervention offset data pointing to an economic slowdown.
Regional currencies are still reeling from higher-than-expected U.S. inflation figures, prompting traders to further lower expectations that the Federal Reserve will cut interest rates soon.
Many Fed officials also warned that persistent inflation would prevent the bank from cutting interest rates ahead of schedule. The dollar rose to a three-month high earlier this week but fell slightly in overnight trading.
Both indexes were little changed in Asian trade and remained within sight of their highest level since mid-November.
Yen losses are limited by observing interventions; the economy goes into recession
The index rose 0.2% on Thursday but hovered near its lowest level since November. Earlier this week, the currency also broke above 150 to the dollar.
But further losses in the yen were capped by a slew of Japanese officials who warned they were watching for any sharp moves in the yen that could herald some intervention in the foreign exchange market. Levels above 150 yen have attracted government intervention in the past.
Data showed Japan’s economy contracted unexpectedly in the fourth quarter, entering a technical recession as private spending fell further.
The weak economy is calling into question the Bank of Japan’s plans to begin raising interest rates in 2024. Analysts at ING said the trend was likely to delay the BOJ’s plans and that they only expected a hike by June.
Despite strengthening on Thursday, the yen remained the worst-performing Asian currency this week amid rising concerns over higher, longer-term US rates, which have been a key weight on the Japanese currency over the past two years.
Asian currencies had been broadly trading flat to low but suffered sharp losses this week as concerns about U.S. interest rates dampened sentiment for the region.
The index fell 0.1% and hovered near a three-month low as data showed Australia cooled further in January – a trend that gives the Reserve Bank less incentive to raise interest rates further.
The indices and the remained at the same level, but fell by 0.4%.
Offshore trade fell 0.1% as mainland markets remained closed for the week-long Lunar New Year holiday.
The fall was 0.4%, sidestepping a stock market rally after Defense Minister Prabowo Subianto appeared poised to win the country’s presidency.