Most Asian currencies rose on Thursday, albeit slightly, as the dollar’s recovery stalled ahead of key economic readings likely to weigh on expectations of interest rate cuts.
Regional currencies came under renewed pressure this week as the dollar recovered from 13-month lows, amid growing speculation about how far the US Federal Reserve will cut interest rates this year.
Fears of renewed trade tensions between China and the West also dampened public sentiment.
Dollar’s rebound eases as GDP, PCE tests approach
Gold and silver prices fell 0.1% in Asian trading as the recovery from 13-month lows slowed.
Focus now turns to a revised reading of second-quarter data, due later Thursday, for more insight into the U.S. economy.
A preliminary reading of second-quarter GDP growth showed the U.S. economy held up well, raising hopes that the world’s largest economy is about to enter a soft landing. But the strong growth gives the Federal Reserve less impetus to cut interest rates sharply.
Inflation data – the Fed’s preferred gauge of inflation – is due out on Friday and is likely to influence interest rate expectations.
The poll showed that traders were divided between a 25 and 50 basis point cut in September.
Japanese Yen Stable, Tokyo CPI Release Awaited
The Japanese yen steadied on Thursday after posting a strong rally earlier this week. The pair hovered around 144.56 yen after falling to a low of 143 yen on Tuesday.
The yen was supported by continued bets that the Bank of Japan will raise interest rates again this year, following a series of hawkish signals from bank officials. But the country’s inflation data came in below the BOJ’s forecast of a steady rise in inflation.
Focus now turns to data out of Tokyo on Friday. The reading serves as a gauge of national inflation and is likely to influence interest rate hike expectations.
Broader Asian currencies rose after seeing some weakness earlier this week.
The Chinese Yuan pair fell 0.2%, supported by a series of stronger-than-expected midpoint fixings by the People’s Bank of China.
But sentiment toward China remained bleak amid fears of a trade war with the West, especially after Canada joined the United States and the European Union in imposing heavy tariffs on China’s electric vehicle sector.
The Australian dollar rose 0.3%, extending gains from the previous session, as expectations of a hawkish monetary policy from the Reserve Bank of Australia for July strengthened, although analysts were not convinced that the RBA would raise interest rates further.
The South Korean won fell 0.1%, while the Singapore dollar fell 0.2%.
The Indian Rupee pair declined slightly after testing the Rs 84 level earlier this week and remained weak.