© Reuters
Investing.com – Most Asian currencies fell on Friday, giving up some gains from the previous session as uncertainty persisted over the path of US interest rates, while the Japanese yen fell as the Bank of Japan maintained its ultra-loose policy stance.
The yen is near a seven-month low as the Bank of Japan offers no surprises
It recovered some early losses after the Bank of Japan’s decision, but it traded near seven-month lows against the dollar.
reached record lows, and said it will continue the yield curve control policy in the near future to support economic growth. The bank also predicted above-average strength for the Japanese economy this year.
The Bank of Japan’s pessimistic outlook has hit hard on the Japanese yen in recent weeks, with somewhat optimistic signals from the Federal Reserve pointing to a widening gap between Japanese and US interest rates.
The focus is now on BoJ Governor Kazuo Ueda’s speech for more signals about the path of monetary policy, which continues to trend well above the BoJ’s target range.
Uncertainty about the Federal Reserve weighed on broader Asian currencies on Friday, although most regional units saw some relief after the dollar fell in overnight trade. And it rose by 0.1% in Asian trading, after declining by about 0.8% in overnight trading.
The Fed had pegged earlier this week, but expects at least two more hikes this year as the trend continues above the central bank’s target range.
But a host of weak US economic readings such as slowdowns, flats and recessions have raised questions about how much leeway the Fed has to continue raising interest rates.
However, US interest rates are expected to remain elevated for a longer period, capping any significant gains in Asian markets.
It fell 0.2% on Friday, while the interest rate-sensitive index lost 0.4%.
The index fell 0.1 percent after hitting a one-month high this week, as the currency also benefited from weak oil prices.
Interest rate cuts weigh on the Chinese yuan
It fell 0.2% on Friday and hovered above six-month lows for the dollar after the People’s Bank of China cut a slew of lending rates this week.
The People’s Bank of China (PBOC) cut interest rates on short- and medium-term lending, and is widely expected to cut its record rate next week, as it struggles to support economic growth.
The trend indicates a widening gap between Chinese and international interest rates, and is expected to weaken the yuan’s attractiveness.