Investing.com — Most Asian currencies remained range-bound on Thursday, while the dollar held firm amid uncertainty over U.S. interest rates ahead of key economic signals in the coming days.
The Japanese yen saw extended losses, with the pair hitting 34-year highs ahead of the Bank of Japan's meeting on Friday. The currency pair also surpassed the level that traders widely expected would trigger intervention from the Japanese government.
USDJPY exceeds intervention level; The Bank of Japan was waiting
The USD/JPY pair rose above the 155 level in overnight trading, and settled around 155.44 in Asian trading.
Traders had widely expected the 155 figure to serve as a threshold for intervention in the currency market by the Japanese government. But officials only continued with their verbal warnings, while continued gains in USD/JPY indicated that little action had been taken.
The weakness of the Japanese yen put the focus squarely on the future.
The central bank is widely expected to keep interest rates unchanged on Friday, following a historic rate hike in March.
But recent weakness in the yen, coupled with expectations of higher wages and firmer inflation, has traders on alert for any hawkish signals from the Bank of Japan.
The Bank of Japan is likely to raise its inflation forecasts and reiterate its plans to raise interest rates further this year – a scenario that is likely to strengthen the yen.
But the extent of the yen's recovery remains uncertain, given that the biggest point of pressure on the yen – fears of higher US interest rates for a longer period – remains.
Dollar stabilizes with more price signals available
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The index stabilized in Asian trade after a slight recovery in overnight trading.
The dollar remained close to the highest levels in more than five months hit last week, as traders steadily digested expectations of an early cut in interest rates by the Federal Reserve.
Economic data due this week is set to provide further indications on the path of interest rates. First-quarter data from the US is due later on Thursday, and will show how resilient the US economy will be at the start of 2024.
The most closely watched data will be the Fed's preferred measure of inflation – which is due on Friday.
Data expectations kept most Asian currencies in a bearish position. The South Korean won pair moved little even after showing that the economy grew much more than expected in the first quarter.
The Singapore dollar pair fell 0.1%, while the Chinese yuan pair fluctuated amid a series of aggressive reforms by the People's Bank of China.
The Indian rupee pair is hovering below record highs set earlier in April, with traders remaining cautious on the currency as India's 2024 general elections begin this week.
