Most Asian currencies edged higher on Wednesday as the dollar’s weakness provided some respite to regional markets. However, the Japanese yen continued to underperform despite concerns about government intervention.
The greenback extended its retreat from recent five-month highs this week following soft purchasing managers index data. Nevertheless, persistent expectations of higher U.S. interest rates and anticipation of key economic data kept traders predominantly in favor of the dollar.
Yen remains weak as USDJPY approaches 155
Despite the softer dollar, the Japanese yen saw little relief, with the USDJPY pair trading near 34-year highs and nearing the 155 level.
The yen weakened despite warnings from Japanese officials about potential government intervention to support the struggling currency. Traders viewed the USDJPY reaching 155 as a potential trigger for government intervention.
The yen’s weakness preceded a Bank of Japan meeting on Friday, where the central bank is anticipated to maintain rates unchanged after a historic hike in March. However, its outlook on inflation and economic growth will be closely monitored.
Australian dollar rallies on stronger-than-expected inflation
The Australian dollar, represented by the AUDUSD pair, was among the top performers in Asia on Wednesday, climbing 0.5% to nearly a two-week high.
The currency surged following a stronger-than-expected consumer price index inflation reading for the first quarter, surpassing the Reserve Bank of Australia’s annual target of 2% to 3%.
The robust inflation data provides further support for the RBA to maintain higher interest rates, which is positive for the Australian dollar.
Dollar stabilizes after overnight losses, awaiting GDP and inflation data
The dollar index and dollar index futures showed little movement in Asian trading after Tuesday’s sharp decline, driven by unexpected weakness in U.S. business activity according to the purchasing managers index data.
However, the dollar maintained most of its gains made in April as expectations for early interest rate cuts by the Federal Reserve diminished.
More significant U.S. economic indicators are expected this week, including first-quarter gross domestic product data on Thursday and the PCE price index, the Fed’s preferred inflation gauge, on Friday. Both readings are anticipated to influence the central bank’s interest rate outlook.
While weakness in the dollar provided relief to Asian currencies, they still recovered from losses incurred in April.
The Chinese yuan, represented by the USDCNY pair, stabilized near five-month highs amidst renewed doubts about the recovery of Asia’s largest economy. However, further weakness in the yuan was mitigated by signs of currency market intervention by the People’s Bank.
The South Korean won, represented by the USDKRW pair, declined by 0.2%, while the Singapore dollar, represented by the USDSGD pair, fell by 0.1%.
The Indian rupee, represented by the USDINR pair, moved away from record highs reached last week but remained well above the 83 level.
This article has been generated and translated with the assistance of artificial intelligence. Source: investing.com.