Most Asian currencies rose on Friday as the dollar’s recovery slowed ahead of a highly anticipated speech by Federal Reserve Chairman Jerome Powell, where he is expected to provide further signals on interest rate cuts.
The Japanese yen was the best performer in Asia, extending a rally seen earlier this week after Bank of Japan Governor Kazuo Ueda made some hawkish comments during a parliamentary hearing. His comments also prompted markets to shrug off somewhat mediocre inflation data for July.
Broader Asian currencies rose, but were set for a tepid week as optimism over a U.S. interest rate cut offset renewed concerns about slowing economic growth.
Japanese yen rises after Ueda says interest rates are too low
The Japanese yen rose on Friday, with the pair falling 0.4%. The pair was set to fall 1.3% this week.
Bank of Japan Governor Ueda said short-term interest rates were still too low and needed to be raised further to reach neutral levels. He also reiterated the bank’s recent message that it would raise rates further if inflation remained stable.
Ueda’s comments boosted the yen, which has been on a rise since the central bank raised interest rates by 15 basis points in late July. The prospect of a rate hike presents further upside opportunities for the yen.
But that idea was somewhat dispelled by mixed consumer inflation data in July. While the CPI and CPI rose, the headline core inflation rate, which the Bank of Japan closely watches, fell below 2%, raising doubts about how much room the BOJ has to raise interest rates.
Dollar falls as Powell’s remarks approach
Gold and silver prices fell about 0.2% in Asian trading, as the recovery from seven-month lows stalled.
Attention now turns to Federal Reserve Chairman Jerome Powell’s speech at the Jackson Hole Symposium later Friday, where he is expected to provide further clues on interest rates and the economy.
Powell’s speech also comes as weak labor data earlier this week has raised renewed concerns that a slowing labor market could lead to a U.S. recession.
Data showed that markets remain divided over whether to cut interest rates by 25 or 50 basis points in September.
Broader Asian currencies rose on Friday and were on track for a moderate week despite recent losses in the dollar.
The Chinese yuan fell by 0.1%, while the Australian dollar rose by 0.2%.
The South Korean won pair fell by 0.3%, while the Singapore dollar pair remained flat.
The Indian Rupee pair stabilized after testing levels above Rs 84 again earlier in the day.