Most Asian currencies fell slightly on Friday as traders turned cautious amid increased volatility in the Japanese yen, which raised speculation about whether the government had intervened in the markets.
Losses in regional units were muted as the dollar held steady at a one-month low, after weaker-than-expected U.S. CPI inflation data boosted optimism about interest rate cuts.
But sentiment towards Asia was dragged down by volatility in the yen, while markets also digested mixed trade figures from China.
Japanese Yen Volatile as USD/JPY Drops from 161; Focus on Intervention
The Japanese yen was volatile in Friday trading, with the pair rising 0.2% to around 159.18 yen.
The pair fell more than 2% on Thursday after a weak US CPI report, falling from levels close to a 38-year high hit earlier in July.
But the sharp decline in the yen has raised questions about whether the Japanese government is actively intervening in currency markets. Officials have offered few signs of that, even after issuing a series of warnings in recent weeks about betting heavily against the yen.
Data on the Bank of Japan’s balance sheet, due later in July, is expected to provide more clarity on whether the government has already intervened. Traders also speculated whether short positions in the yen were squeezed by the sharp decline in the dollar, following a weak reading in June’s consumer price index.
Dollar nears one-month low as CPI slides, spurring rate cut bets
Gold steadied on Friday after falling to a one-month low during overnight trading.
The US dollar was hit hard by weaker-than-expected data, which showed inflation slowed slightly more than expected in June.
The reading boosted bets that the Federal Reserve will have more confidence in starting to cut interest rates.
Markets were seen expecting the Fed to cut rates in September at 83.4%, up from 64.7% last week, according to .
Chinese yuan falls amid mixed trade data
The Chinese yuan eased slightly on Friday, with the pair up 0.1% after falling sharply in the previous session. But the yuan remained close to its weakest levels since November.
Trade data released on Friday raised further uncertainty about the Chinese economy. China’s economy grew more than expected in June to its highest level in nearly two years, beating expectations.
But Chinese exports unexpectedly contracted during the month as domestic demand remained weak.
The decline has raised concerns about weak consumption and slowing growth in Asia’s largest economy, especially after weak consumer inflation figures released earlier this week showed deflation in China is still ongoing.
Broader Asian currencies were in a flat-to-low range after seeing some gains overnight. The South Korean won rose 0.5%, while the Singapore dollar added 0.1%, as data showed Singapore’s gross domestic product grew more than expected in the second quarter.
The Australian dollar rose 0.1%, while the Indian rupee moved slightly.
