Asia FX dented by recession jitters, yen rises on sticky inflation By Investing.com

by Ambar Warrick

Investing.com – Most Asian currencies fell on Friday as weak economic readings heightened concerns about a possible recession this year, while the Japanese yen rose as indicators of stubborn inflation increased bets that the Bank of Japan will eventually tighten policy this year.

It rose 0.3%, as Japanese inflation held steady in March from the previous month at 3.1%. And while the reading was well below the 40-year highs seen earlier this year, it did show that inflation remains stubbornly above the Bank of Japan’s annual target of 2%.

This prompted some bets that the central bank would eventually tighten its ultra-loose policy this year, although new governor Kazuo Ueda said he would keep policy unchanged in the near term. Bank of Japan is.

Other Japanese economic indicators caused more headwinds for the economy, with both growth and activity missing expectations in April.

Broader Asian currencies fell as less-than-expected US economic data heightened fears of a recession in the world’s largest economy, while Federal Reserve officials also presented a hawkish policy outlook.

The index fell 0.2%, also pressured by weaker-than-expected data, while the interest rate-sensitive index lost 0.4%.

It sank nearly 0.5% amid plans for a major overhaul of the RBA’s structure, which would include the creation of two councils and a separate rate-setting board.

The US held steady on Friday, but was set for its first weekly gain in six as a slew of Federal Reserve officials called for more interest rate hikes this year. Most recently, Philadelphia Fed President Patrick Harker warned Thursday that US interest rates are likely to rise further and stay there longer, even as economic activity slows.

The key fell more than expected in March, while it grew more than expected. The Federal Reserve report also showed that economic activity is slowing.

While the markets are betting that weak growth will eventually lead to a halt in interest rate hikes by the Fed, the bank is still wide spread.

This, along with deteriorating appetite for risk-driven assets, is expected to weigh heavily on Asian markets in the coming months.