Asia FX recoups some weekly losses, dollar steady amid debt ceiling impasse By Investing.com

Investing.com – Most Asian currencies rose on Friday, rebounding from sharp losses this week, while the dollar held below two-month highs as markets await more signs of progress toward raising the debt ceiling.

It rose 0.2%, but was among the worst performing Asian currencies this week, down nearly 2% as expectations of a broader gulf in domestic and US interest rates weighed on the currency. The yen was also trading just above a six-month low against the dollar.

Less-than-expected data on Friday spurred further expectations that tightening policy would be delayed this year, although the reading was still well above the Bank of Japan’s 2% annual target.

The index rose 0.3%, rebounding from its lowest level in nearly six months. But the currency remained well below the key 7 level for the dollar, and it also received little support from the People’s Bank of China’s daily midpoint reforms.

The yuan was hit by concerns about slowing economic recovery in China, as well as deteriorating relations between Beijing and Washington after China’s sales ban from US chip maker Micron Technology (NASDAQ:).

Fears of a new COVID-19 outbreak in China also stoked sentiment, with media reports indicating that cases were on the rise again.

Broader Asian currencies advanced on Friday, but were taking losses for the week as concern about a possible US debt default and higher currency rates for a longer period kept currency markets focused on the dollar.

It rose 0.5% while it added 0.4%. It rose 0.1%, but was close to a seven-month low as data on Friday showed that it slowed in April amid mounting pressure from rising inflation and interest rates.

and saw some profit-taking in Asian trade, down about 0.2% each, but up nearly 1% for the week. The two also traded at their highest levels in two months.

Markets await a breakthrough in negotiations to raise the US debt ceiling and avert a government default, though lawmakers have given little sign that a deal is imminent. But the dollar has benefited from safe-haven demand, with traders betting that even a default would do little to undermine the dollar’s status as the global reserve currency.

However, the prospect of a US debt default bodes poorly for the global economy. This notion kept traders away from the riskier Asian currencies.

The Fed’s optimistic outlook also kept Asian units under pressure, as traders bet that US interest rates would remain elevated for longer.