Investing.com — Most Asian currencies fell on Wednesday as anticipation for key U.S. inflation data left traders largely favoring the dollar, with the Japanese yen approaching levels that sparked the latest government intervention.
The Australian dollar was an outlier during the day, rising sharply after a hotter-than-expected inflation reading sparked fears of a rate hike by the Reserve Bank of Australia.
The strength of the dollar and deteriorating sentiment towards China, amid fears of a trade war, affected the yuan, while most other Asian currencies also declined.
The index consolidated slightly in Asian trading, and approached its highest levels in two months. The focus this week was largely on the data, the Fed’s preferred measure of inflation.
The Japanese yen is weak, and USDJPY is back near 160
The Japanese yen pair rose 0.1% to 159.80 yen, approaching the 160 yen level that prompted the intervention in May.
Government officials continued to warn that they would intervene in the event of any excessive fluctuations in the value of the yen. This idea has prevented the USD/JPY pair from breaching the 160 level, at least for the time being.
The yen’s latest bout of weakness came after cautious signals from the Bank of Japan about policy tightening during its June meeting. Fears of rising US interest rates also kept traders selling the yen and buying the dollar.
Australian Dollar Firms, AUDUSD Rises on Hot CPI
The Australian dollar rose 0.5% after inflation data came in hotter than expected for May.
The reading showed inflation moving away from the Reserve Bank of Australia’s annual target range of 2%, sparking speculation that the central bank may raise interest rates further in 2024.
This reading comes just one week after the Reserve Bank of Australia kept interest rates steady during its June meeting, but took a more hawkish stance than markets expected. Australian bond yields rose after the CPI data, with traders speculating that the Reserve Bank of Australia may raise interest rates by August.
Broader Asian currencies fell, as expectations for key US inflation data kept traders biased towards the dollar. Concerns about China also kept traders cautious about regional markets.
The Chinese yuan pair remained at its highest level in seven months, after another weak reform by the People’s Bank of China. Mounting pressure against the yuan, amid concerns about a trade war with the West, has kept the People’s Bank of China on two consecutive days of weak mid-term reforms.
The South Korean won pair rose by 0.1%, while the Singapore dollar pair rose slightly.
The Indian rupee pair rose slightly but remained below the record levels recorded earlier in June.
