Most Asian currencies moved in a narrow range on Friday as risk aversion in global financial markets sparked some safe-haven flows into the dollar, while markets awaited key nonfarm payrolls data for further cues.
However, the Japanese yen remained steady after the Bank of Japan’s hawkish policy sparked a rally in the currency this week, taking it to its strongest levels since late March. The currency also saw some safe-haven bids as the global carry trade continued to collapse.
While global stock markets have registered sharp losses on concerns about slowing economic growth, losses in foreign exchange markets have been limited by the prospect of a U.S. interest rate cut in the coming months. This perception has also limited any strength in the dollar.
Yen Steady, USD/JPY Tests 148 Amid BoJ Tightness
The Japanese yen stabilized after a strong rally on Friday, with the pair hovering around the 149.50 level. The pair had fallen to the 148.88 level earlier in the day.
The yen rose this week after the Bank of Japan’s decision to potentially raise interest rates in 2024, pointing to some improving trends in the Japanese economy.
The change in the total amount of yen in circulation in Japan rose more than expected in July, data showed on Friday, pointing to higher inflation in the coming months.
The Bank of Japan said inflation was likely to rise as domestic wages rise – marking a more hawkish outlook for the central bank this year.
Dollar recovers some losses, non-farm payrolls data on the way
The dollar steadied in Asian trading after rebounding overnight, as the greenback benefited from safe-haven demand.
The dollar pared some of the losses it suffered earlier in the week after the Federal Reserve signaled the possibility of cutting interest rates in September.
Weak economic data has boosted bets on a September interest rate cut, with data showing a sharp contraction in manufacturing activity in June.
The focus now turns to upcoming data for further cues on the economy, with any further signs of a slowing labor market likely to boost expectations of a rate cut.
Broader Asian currencies moved in a narrow range. The Chinese yuan steadied after a week of sharp volatility, although sentiment towards China remained negative as weak PMI data heightened concerns about a slowing economy.
The Australian dollar rose slightly ahead of Thursday’s central bank meeting, as weak consumer price index data bolstered bets that the central bank will keep interest rates on hold until at least next year.
But the second quarter data came in slightly higher.
The South Korean won rose 0.2% despite posting a slightly stronger-than-expected reading in July, while the Singapore dollar remained flat.
The Indian Rupee pair did not witness any significant movements and remained close to record high levels.
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