Investing.com – Most Asian currencies weakened on Friday, while the dollar steadied ahead of key inflation data that is expected to influence the Federal Reserve’s stance on interest rate cuts.
While the dollar’s overnight decline following weaker-than-expected US gross domestic product data provided some relief to Asian units, it was largely offset by persistent bets on higher and longer-term US interest rates. The dollar also pared some of its losses in Asian trade.
Japanese yen weakens, USDJPY crosses 156 after Bank of Japan
The Japanese yen was weak, with the pair rising above 156 to new 34-year highs after comments from the Bank of Japan raised doubts about how much room the central bank has to raise interest rates further.
Bank of Japan after historic hike in March. The central bank also predicts higher inflation in the coming years.
But the Bank of Japan is also raising doubts about how much room it has to keep raising interest rates. This represented a generally dovish outlook for the yen.
Softer-than-expected data released earlier on Friday further raised doubts about the Bank of Japan’s aggressive stance.
However, the yen’s losses were limited by lingering concerns about government intervention in currency markets. An upcoming press conference with the Bank of Japan governor at 02:30 ET (0630 GMT) also raised the possibility of more hawkish signals.
Asian currencies also broadly weakened on Friday amid persistent concerns about higher, longer-term US interest rates. The Chinese yuan rose slightly and remained near recent five-month highs.
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The South Korean pair rose 0.4% and the Singapore dollar gained 0.1%.
The Australian dollar was supported by strong inflation data, which coupled with gains earlier this week prompted bets on higher and longer-term domestic rates.
The Indian rupee pair was little changed, with traders wary of increased volatility in Indian markets following the start of the 2024 general elections.
Dollar stabilizes amid PCE inflation
Rates also rose marginally in Asian trade, recouping some losses overnight.
showed that US economic growth slowed more than expected in the first quarter amid persistent inflation and high rates.
However, inflation remained uncomfortably high, with growth rates exceeding expectations.
This brought the upcoming data into focus. This number is the Federal Reserve’s preferred inflation indicator.
Despite Thursday’s weak GDP data, traders were seen holding steady on expectations for any near-term Fed rate cut. Now traders estimate a rate cut only by September or the fourth quarter.