Investing.com — Most Asian currencies rose Thursday after the dollar lost ground as comments from Fed Chairman Jerome Powell led to more optimism about rate cuts, putting upcoming inflation data into sharp focus.
Regional currencies regained some ground against the dollar as traders largely continued to bet on a Fed rate cut in September. Thursday’s Consumer Price Index inflation report will provide more guidance on this front.
But weak economic data left the Japanese yen lagging behind its peers, with the currency hovering near its weakest level in 38 years.
Dollar retreats with CPI data in focus
The and both fell about 0.1% in Asian trading, widening short-term losses after Powell reiterated his outlook that the U.S. economy would achieve a soft landing.
A major point of pressure on the dollar was Powell, who argued that the Fed did not need to see inflation fall below its 2% target to start cutting rates, but only that the bank needed sufficient confidence that inflation was on the rise. was decreasing.
This put the coming figures into clear focus, with any sign of easing inflation likely to lead to greater expectations for a rate cut.
Traders showed they maintain a 72.5% chance that the Fed will cut rates by 25 basis points in September.
Japanese Yen weak, USDJPY remains above 161
The Japanese yen lagged its peers and saw little relief even as the dollar retreated and the outlook for US interest rates improved. The pair hovered well above 161 yen, remaining close to levels last seen in 1986.
Weak core machine order data for May pointed to continued weakness in the Japanese economy, reinforcing the idea that the Bank of Japan will have limited room to raise rates further.
Still, the threat of possible government intervention in the currency markets ensured that the yen’s decline remained relatively staggered.
Broader Asian currencies strengthened mainly on the prospect of an eventual cut in US interest rates.
The Australian dollar pair rose 0.2% even as Australian inflation expectations data showed some cooling.
The Chinese yuan pair fell 0.1%, with the Chinese currency seeing some relief after disappointing inflation data on Wednesday.
The South Korean won pair fell 0.3% after the Bank of Korea held its twelfth straight meeting. But some policymakers raised the prospect of a rate cut within the next three months.
The Singapore dollar pair fell 0.1%, while the Indian rupee pair moved little.
