Investing.com — Most Asian currencies fell on Friday, while the dollar steadied in anticipation of key inflation data that is expected to influence the Federal Reserve's stance on cutting interest rates.
While the overnight drop in the value of the dollar – in the wake of weaker-than-expected US GDP data – provided some relief to Asian units, this was largely offset by continued bets on higher US interest rates for a while. Longer. The dollar also trimmed some of its losses in Asian trade.
The Japanese yen weakens, and USDJPY exceeds the 156 level after the Bank of Japan
The Japanese yen underperformed, with the pair rising to 34-year highs after comments from the Bank of Japan raised doubts about the central bank's ability to raise interest rates further.
Bank of Japan after historic rise in March. The central bank also expects inflation to rise in the coming years.
But the Bank of Japan is also raising doubts about its ability to continue raising interest rates. This has presented a largely cautious outlook for the yen.
The weaker-than-expected reading – released earlier on Friday – raised additional doubts about the hawkish Bank of Japan.
However, the yen's losses were limited due to ongoing concerns about government intervention in currency markets. The upcoming press conference with the Bank of Japan Governor, at 02:30 EST (06:30 GMT), also showed the possibility of more hawkish signals.
Broader Asian currencies also fell on Friday, amid continuing concerns that US interest rates will rise for a longer period. The Chinese Yuan pair rose slightly and remained close to five-month highs recently.
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The South Korean pair rose by 0.4%, while the Singapore dollar pair rose by 0.1%.
The Australian dollar pair received support from strong inflation data, which, coupled with the rise earlier this week, sparked bets on higher interest rates for a longer period in the country.
The Indian Rupee pair moved slightly, with traders growing concerned about more volatility in Indian markets with the start of the 2024 general elections.
Dollar stabilizes as personal consumption expenditures swell
The US dollar rose marginally in Asian trading, reversing some of the losses it incurred overnight.
Growth in the US economy slowed more than expected in the first quarter, amid sticky inflation and rising interest rates.
But inflation remained uncomfortably high, growing more than expected.
This puts the incoming data directly into focus. This reading is the Fed's preferred measure of inflation.
Despite Thursday's weak GDP reading, traders were seen steadily calculating expectations for any near-term interest rate cuts by the Federal Reserve. It now appears that traders are pricing in rate cuts only by September, or the fourth quarter.