Investing.com — Most Asian currencies rose Thursday after some softer U.S. consumer inflation data pushed the dollar to a one-month low and saw traders increase their bets on a September interest rate cut.
But gains in some regional units were held back by a mix of soft economic data and trade tensions, especially in Japan, China and Australia.
Dollar is at its lowest point in more than one month as CPI data increases hopes for rate cuts
Shares fell 0.2% each in Asian trading, widening steep losses from month-on-month inflation and making it cooler than expected for April.
The figures, which were also followed by softer-than-expected readings, boosted hopes that inflation will cool further in coming months, giving the Fed more confidence to start cutting rates.
As a result, traders raised their expectations for a 25 basis point cut in September, with the probability rising to nearly 54% from last week’s 49%, according to the .
Still, the CPI reading remained well above the Fed’s annual target of 2%, while a series of Fed officials also warned in the past week that the central bank needed more convincing that inflation was falling.
The Japanese yen is recovering, but weak GDP is slowing the recovery
The Japanese yen pair, which is inversely proportional to the currency’s strength, fell 0.6 to around 154 yen on Thursday, extending overnight declines as the dollar weakened.
But the pair still remained well above levels seen earlier in May, when the government intervened in the currency markets.
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The yen’s recovery stalled as gross domestic product data showed Japan’s economy contracted much more than expected in the first quarter as consumer spending ground to a halt.
This raised doubts about how much room the Bank of Japan has to keep raising rates.
Other major Asian currencies were also held back by idiosyncratic factors.
Chinese Yuan, Australian Dollar Lagging
The Chinese yuan pair fell only slightly as sentiment towards China was battered by Washington imposing tougher trade tariffs on China’s key industries such as electric vehicles, medicine and solar technology. Beijing threatened reprisals over the measure.
Chinese and data will be released on Friday.
The Australian dollar pair moved little due to an unexpected rise in heightened expectations of a cooling labor market, which in turn gives the Reserve Bank less impetus to raise rates further. Concerns about China also weighed on the Australian, which has a large trade exposure to the country.
Other Asian currencies advanced after a weaker dollar. The South Korean won pair fell 0.4%, while the Singapore dollar pair fell 0.1%.
