Investing.com — Most Asian currencies stayed within a tight range Thursday after posting strong overnight gains, while U.S. consumer inflation data looked softer than expected and pushed the dollar close to a seven-month low.
Sentiment towards regional markets was also helped by positive economic data from Japan, Australia and to some extent China.
The and hovered around mid-102 levels in Asian trading and remained near seven-month lows.
Wednesday’s figures were slightly lower than expected, boosting bets on a rate cut in September. But traders increasingly moved toward a 25 basis point cut instead of a 50 basis point cut as CPI data continued to show a month-on-month increase.
This idea limited gains in most Asian currencies, although broader risk-driven markets, especially equities, rose sharply.
Japanese yen stable, while second quarter GDP exceeds expectations
The Japanese yen held steady Thursday after a mediocre performance in overnight trading, as improved risk sentiment sapped demand for the safe-haven currency. The pair hovered around 147.25 yen.
Data showed Japan’s economy grew stronger than expected in the second quarter, helped by a recovery as Japanese wages rose.
This reading was in line with the Bank of Japan’s expectation that better wages will boost the Japanese economy, giving the central bank more leeway to keep raising interest rates this year.
Such a scenario heralds more strength for the yen, which has already enjoyed a stellar rally against the dollar over the past month.
The Chinese yuan weakens due to mixed economic signals
The Chinese yuan weakened on Thursday, with the pair rising 0.2%, after a slew of readings presented a mixed picture of the Chinese economy.
Chinese growth was stronger than expected, providing some confidence in improving consumer spending and inflation.
But grew less than expected, just like . That of China also unexpectedly rose to 4.2%.
The readings showed that while some policies from Beijing helped consumer spending, the economy as a whole was still under pressure.
The Australian dollar is rising on strong jobs data
The Australian dollar was the best performer in Asia, with the pair rising 0.5% after data showed outsized growth for the second consecutive month in July.
The results showed Australia’s labor market was under pressure despite a broader weakening in the economy, potentially supporting inflation and giving the Reserve Bank of Australia more leeway to keep interest rates high.
Traders speculated that the RBA could even raise rates further to cool the labor sector after Governor Michele Bullock warned last week that the central bank was open to further rate hikes to combat persistent inflation.
Broader Asian currencies were muted amid market holidays in South Korea and India.
