Most Asian currencies rose on Thursday, with the Australian dollar making strong gains after Reserve Bank of Australia Governor Michelle Bullock said the bank would not hesitate to raise interest rates further to curb inflation.
The Japanese yen also rose, steadying after falling in the previous session as data from the Bank of Japan confirmed the bank’s hawkish rhetoric, despite recent comments from BOJ officials that downplayed the likelihood of an interest rate hike.
Broader Asian currencies found some strength as the dollar retreated amid lingering concerns about a U.S. recession and lower interest rates. But fears of a slowdown also kept appetite for risk-driven assets in check.
Both fell 0.2% in Asian trading.
Australian dollar rises after Bullock threatens to raise rates
The Australian dollar was the best performer in Asian markets, with the pair rising 0.7%.
The Australian dollar’s gains came after Reserve Bank of Australia Governor Bullock said the bank would not hesitate to raise interest rates due to further upside risks to inflation.
The central bank kept interest rates steady at a meeting earlier this week, but delivered a hawkish tone in the face of stubborn inflation.
But with Bullock explicitly threatening further rate hikes, traders saw such a possibility as weighing on the Australian dollar, which benefited the currency.
Japanese Yen Rises Amid BoJ Volatility
The Japanese yen rose on Thursday after posting sharp losses in the previous session. The pair fell 0.2% to around 146.36 yen.
The pair has seen sharp volatility in recent sessions, initially falling to 141 amid safe-haven demand and as the Bank of Japan raised interest rates and signaled more increases this year.
The yen fell after some Bank of Japan officials downplayed the central bank’s hawkish rhetoric on Wednesday.
But a summary of the Bank of Japan’s policymakers’ views released on Thursday showed that many policymakers favor further rate hikes, and that they see rates reaching a neutral level with the economy growing at 1% – which would mean a rise of at least 75 basis points from current levels.
Despite recent volatility in the yen’s value, the currency is still sitting on top of a stellar recovery over the past month, and has also benefited from a decline in the carry trade.
Broader Asian currencies rose. The Chinese yuan fell 0.2% after a series of stronger-than-expected midpoint fixings. That helped the currency withstand middling trade data on Wednesday.
The Singapore dollar pair fell by 0.2%, while the South Korean won pair rose by 0.2%.
The Philippine peso fell 0.4% after GDP data showed the economy grew as expected in the second quarter.
The Indian Rupee pair remained near its record high above Rs 84, not moving much after the central bank kept interest rates unchanged as expected.
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