Investing.com – Most Asian currencies weakened on Tuesday, while the dollar rose to a more than five-month high as geopolitical tensions between Iran and Israel rise and bets on higher, longer-term U.S. interest rates rise.
Stronger-than-expected data on China’s gross domestic product helped provide some optimism for Asia’s largest economy, but the data was offset by other economic averages.
Chinese yuan unchanged as first-quarter GDP beats forecasts
The Chinese yuan was little changed on Tuesday, with the pair hovering above 7.2, although data showed the economy grew more than expected in the first quarter.
But that was overshadowed by softer-than-expected March data, which showed China’s economic performance may already be slowing after a strong start to the year.
The People’s Bank of China also set a weak midpoint for the yuan, given that the central bank has limited ability to continue supporting the Chinese currency. The offshore yuan pair fell 0.2%, reflecting a strong selling trend towards the yuan.
While monetary stimulus measures are expected to help support the Chinese economy, they portend further weakness for the yuan in the coming months.
Dollar hits more than 5-month high as bets on rate cut ease, Powell waited
Yi rose 0.1% in Asian trade, reaching its highest level since early November. The dollar’s latest rise comes as US data for March came in stronger than expected, further fueling inflation expectations.
The retail sales data came just days after stronger-than-expected March inflation figures led traders to largely overestimate bets on the Federal Reserve’s June rate cut.
Attention is now focused on a speech due later on Tuesday to provide more insight into interest rate movements and the US economy.
Concerns about rising US interest rates, coupled with weak risk appetite amid rising tensions in the Middle East, were key influences on Asian currencies. Demand for safe havens also led traders to largely favor the dollar.
The Australian dollar, usually seen as a key indicator of risk appetite, was lower on Tuesday with the pair falling 0.4% to a five-month low.
The South Korean currency rose 0.9% to a 17-month high, while the Singapore dollar rose 0.3%.
The Indian Rupee pair was close to record highs, trading well above the 83.5 level.
Japanese Yen Eyes Intervention as USDJPY Hits 34-Year High
The Japanese yen weakened further this week, with the pair rising to a new 34-year high above 154.
The yen’s recent weakness came even as several Japanese government officials warned against excessive speculation in the forex market, a trend that is expected to spur intervention in currency markets.
This has kept traders on alert for any potential intervention from the Japanese government, which would typically involve selling large amounts of dollars to bring down USDJPY.