Most Asian currencies rose on Friday as positive economic readings from the United States and China helped ease recession fears, although improved risk appetite put renewed pressure on the Japanese yen.
The dollar found some strength thanks to better-than-expected labor market data, although any major advance in the greenback was muted by continued bets on interest rate cuts.
The rise in stock markets, due to risk, helped instill some confidence in regional markets.
Chinese yuan rises as inflation rises
The Chinese yuan rose on Friday, with the pair down 0.1% after a stronger-than-expected midpoint fixing by the People’s Bank of China.
The yuan also received support from data showing that inflation in China grew more than expected in July, while inflation fell slightly less than expected.
Data suggested that recent interest rate cuts in China have helped stimulate some consumer spending and prices, although lower interest rates bode well for the yuan in the longer term.
Traders were also cautious about whether Friday’s reading indicated a trend, given that despite some strength in July, deflation in China remains in place.
Japanese Yen Under Pressure as Risk Sentiment Improves
The Japanese yen steadied on Friday, but had suffered sharp declines in recent sessions following some softer signals from the Bank of Japan, as improved sentiment also sapped demand for the currency as a safe haven.
The pair fell slightly to 147.22 yen, but was trading well above its lows of around 141.6 yen recorded earlier in the week.
The yen’s shift came after Bank of Japan officials said they would not raise interest rates during market volatility, softening the hawkish message the central bank delivered at a meeting in late July.
But despite this week’s weakness, the yen has still enjoyed impressive gains against the dollar over the past month, especially as the global carry trade has begun to ease.
Dollar steady, CPI data awaited
Gold and silver prices stabilized in Asian trading after witnessing slight strength in overnight trading.
The better-than-expected data helped spur bets that the labor market has not slowed as sharply as last week’s payrolls data suggested.
But despite the positive data, traders largely maintained their bets on a September rate cut, although they trimmed their expectations for a cut by 50 basis points, an economic report showed.
Broader Asian currencies rose as sentiment improved. The interest-rate-sensitive South Korean won fell 0.7%, while the Singapore dollar fell 0.2% in holiday trade.
The Australian dollar rose 0.1%, extending gains after hawkish signals from the Federal Reserve boosted the currency.
The Indian rupee has retreated from record highs, albeit slightly, after the Reserve Bank of India adopted a somewhat hawkish tone and slightly lowered its growth forecast for the current quarter.
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