Investing.com — Most Asian currencies remained range-bound on Friday, with the dollar holding near two-month highs ahead of key inflation data likely to weigh on the Federal Reserve’s interest rate outlook.
The dollar’s strength has pushed the Japanese yen further below levels traders initially expected would attract government intervention. Mixed inflation data from the Japanese capital has provided little support for the currency, as have repeated warnings from the government.
Weak sentiment towards China, ahead of key PMI data due over the weekend, also kept flows into regional markets limited. The yuan recorded its weakest levels since October, with little evidence of easing selling pressure on the currency.
Japanese Yen Continues to Weaken, USD/JPY Surpasses 161
The Japanese yen continued to weaken, with the pair rising 0.2% on Friday and briefly breaching the 161 level.
The pair is now well above the levels that prompted government intervention in May. While officials have continued to issue verbal warnings, the movement in the USD/JPY pair suggests that no actual intervention has taken place so far.
The Japanese economy also showed a slight increase in inflation. While headline inflation rose, core inflation remained well below the Bank of Japan’s annual target of 2%.
The weak inflation reading added to doubts about how much freedom the Bank of Japan has to tighten monetary policy – a major factor behind the yen’s recent weakness.
Dollar at 2-month high, PCE data awaited
The index rose 0.2% in Asian trading, and was at its highest levels since late April.
Traders remained largely biased towards the US dollar ahead of key data, the Federal Reserve’s preferred measure of inflation.
The reading is due later on Friday and is expected to show inflation slowing slightly in May, but still well above the Fed’s annual target of 2%.
The latest data did little to deter the dollar, showing some slowdown in the US economy, particularly the labour market. Uncertainty over when the US Federal Reserve will cut interest rates and by how much also helped keep flows into the dollar strong.
The broader Asian currencies suffered sharp losses during the month of June amid this uncertainty.
The Chinese Yuan pair saw little movement on Friday and remained at its highest levels since November. The focus now turns to key data, which is due to be released over the weekend.
The Australian dollar pair fell 0.3%, giving up some of the gains it made on the back of a hotter-than-expected inflation reading this week.
The South Korean won fell 0.2% after some stronger-than-expected data.
The Singapore dollar pair rose by 0.1%, and the Indian rupee pair did not witness significant movements, but it remained close to its recent record highs.