Investing.com — Most Asian currencies fell on Friday, with China's yuan heading back towards six-month lows after disappointing business activity readings, while the dollar steadied in anticipation of key inflation data.
Regional currencies also remained under pressure amid lingering concerns about US interest rates rising for longer, as hawkish comments continue to flow from Federal Reserve officials.
But they saw some relief on Thursday, as the dollar fell from its highest levels in more than two weeks after a weak reading on GDP data.
The dollar stabilizes after losses incurred overnight, and awaits a test of personal consumption expenditures
The US dollar index rose 0.1% in Asian trade, steadying from overnight losses after a revised reading for the first quarter showed that the economy grew less than initially expected.
The reading pointed to a slowdown in the US economy, raising some hopes that the Federal Reserve may eventually ease its hawkish stance to boost economic growth.
But fears of flat inflation and rising interest rates remained squarely in the spotlight, with the data – the Fed's preferred measure of inflation – due later on Friday.
The reading is expected to show inflation slowed slightly in April, but remained well above the Federal Reserve's annual target of 2%.
Chinese Yuan weakens as PMIs disappoint; More stimulation in focus
The Chinese yuan pair rose by 0.1%, returning to its highest levels in six months, which it recorded earlier this week.
PMI data showed that Chinese business activity deteriorated in May after some improvement over the past two months. It unexpectedly fell into contraction territory, while growing at a slower pace than expected.
While the readings provided renewed headwinds for the Chinese economy, they also fueled bets on increased stimulus spending from Beijing to support growth. But the aforementioned spending, which would likely involve looser monetary conditions, would likely bode poorly for the yuan.
Other currencies exposed to China moved in a flat to lower range. The Australian dollar pair rose slightly, while the South Korean won pair rose by 0.5%.
The Singapore dollar pair rose approximately 0.1%.
Among other Asian currencies, the Japanese yen pair moved slightly on Friday after falling sharply in overnight trading, tracking some weakness in the dollar.
Inflation in the Japanese capital showed growth as expected in May, although it remains relatively weak. Weak inflation bodes poorly for the yen, because it gives the Bank of Japan less impetus to start raising interest rates.
The Indian rupee pair remained close to its recent record highs, above Rs 83, before the results of the 2024 general elections emerge on June 4.