Investing.com — Most Asian currencies held a narrow range on Thursday, benefiting slightly from a lower dollar, as the Federal Reserve said interest rates were unlikely to fall in the near term, although they were unlikely to rise either.
This kept the Japanese yen's recovery short-lived, with the currency weakening sharply after seeing strong gains on Wednesday. Traders said the yen's recovery this week appeared to be driven by government intervention in currency markets.
The dollar fell from its highest levels in nearly six months after the Federal Reserve's comments, but stabilized in Asian trade. The possibility of US interest rates remaining high for longer bodes well for the dollar.
The Japanese yen reverses course, and USDJPY returns above 156
The pair, which is inversely linked to the strength of the yen, rose 1% to more than 156 on Thursday, after falling to the 153 level during overnight trading.
The yen's strength has been largely linked to two instances of currency market intervention by government officials this week, although they declined to comment directly on any potential corrective moves.
The USDJPY pair fell from the 160 level on Monday, which traders said was the new line in the sand for Japan when it comes to a weak yen. But the factors affecting the yen – led by a dovish Bank of Japan and the wide gap between domestic and US interest rates – are expected to remain influential, limiting the impact of government intervention.
Broader Asian currencies moved in a flat to lower range, suffering sharp losses this week as concerns over US interest rates persist. But the dollar's overnight decline provided some relief, albeit fleeting.
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The Australian dollar pair rose 0.1% despite data showing the Australian economy contracted to its lowest levels in more than three years in March.
The Singapore dollar pair fell slightly, while the South Korean won pair fell slightly even after data showed lower-than-expected inflation growth in April.
The Indian Rupee pair moved slightly, but traded below its record highs set in April.
The dollar stabilizes after falling overnight, awaiting the release of the non-farm payrolls report
Both of them stabilized in Asian trading after falling by 0.6% in overnight trading.
Pressure on the dollar came from a sharp rise in the yen, while Federal Reserve Chairman Jerome Powell confirmed that the bank would not raise interest rates further.
However, the outlook for the dollar remained supported by the possibility of the Federal Reserve cutting interest rates until at least the fourth quarter.
The focus now turns to April data, due on Friday, for further signals on the economy and interest rates.