Investing.com — Most Asian currencies held steady Wednesday, following some overnight weakness in the dollar after Federal Reserve Chairman Jerome Powell indicated progress has been made toward reducing inflation.
The Japanese yen remained vulnerable and at its weakest level in 38 years, with the focus squarely on possible government interventions in the foreign exchange market.
Sentiment towards Asian markets remained weak following disappointing purchasing managers’ index data from China, while expectations of more signals on US yields also kept traders on edge.
The dollar compensates for some losses, more price indications are expected
The and both were steady in Asian trading, after losing about 0.2% each on Tuesday.
The losses in the dollar came as Powell noted some progress in reducing inflation. Yields on US government bonds also fell after Powell’s speech.
But losses in the dollar were limited as Powell also warned that the Fed still needed more confidence to start cutting rates.
Powell’s comments came before more important signals about U.S. monetary policy and the economy this week. The June Fed meeting, along with more speeches from Fed officials, will take place on Wednesday.
The data will be released on Friday.
Japanese Yen Vulnerable With USDJPY Above 161; intervention central
The Japanese yen pair rose 0.1% to 161.63 yen, weakening further as verbal warnings about intervention from Japanese officials did little to support the currency.
The yen’s weakness this week was driven by a sharp downward revision to Japan’s first-quarter gross domestic product data, raising expectations that a struggling economy will leave the Bank of Japan little room to tighten policy.
But traders remained wary of possible government intervention measures. The government had last intervened in May when USDJPY crossed the 160 mark.
Traders speculated that the government planned to intervene during the U.S. July 4 market holiday, when trading volumes are expected to be limited.
Chinese Yuan Weak as Services PMI Disappoints
The Chinese yuan pair rose slightly and remained at its highest level since November.
Weak purchasing managers’ indices put additional pressure on the yuan. June figures were weaker than expected, raising concerns that growth in the sector, which has otherwise supported China’s economy, was slowing.
Uncertainty about China’s economic prospects has negatively impacted the yuan in recent weeks.
Broader Asian currencies held steady after recent losses, although sentiment remained weak on uncertainty over US yields.
The Australian dollar pair rose 0.2% as data showed it grew more than expected in May. Higher retail spending is supporting Australia’s inflation outlook, pointing to higher interest rates.
The South Korean won pair rose 0.3%, while the Singapore dollar pair rose 0.1%.
The Indian rupee pair moved little but remained close to recent record highs.
