Investing.com — Most Asian currencies stayed within a tight range on Thursday, benefiting little from a decline in the dollar, as the Federal Reserve said interest rates were unlikely to fall in the near term, although it was also unlikely they would to rise.
This left the Japanese yen’s recovery short-lived, with the currency weakening sharply after Wednesday’s strong gains. Traders said the yen’s recovery this week appeared to be driven by government intervention in currency markets.
The dollar fell from a six-month high after the Fed’s comments but remained steady in Asian trading. The prospect of US interest rates remaining high for longer bodes well for the dollar.
Japanese yen reverses course, USDJPY back above 156
The pair, which is inversely proportional to the yen’s strength, rose 1% to over 156 on Thursday after falling as low as 153 in overnight trading.
The yen’s strength was largely due to two instances of foreign exchange market intervention by government officials this week, although they declined to immediately comment on any corrective measures.
The USDJPY pair was down from 160 on Monday, which traders said was the new line in the sand for Japan when it came to yen weakness. But the factors weighing on the yen (mainly a dovish Bank of Japan and a wide spread between local and US interest rates) are expected to continue to play a role, limiting the effect of government intervention.
Broader Asian currencies moved from flat to low, posting steep losses this week as worries about US yields persisted. But a sudden drop in the dollar provided some, if fleeting, relief.
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The Australian dollar pair rose 0.1% even as data showed the country’s rate fell to a three-year low in March.
The Singapore dollar pair fell slightly, while the South Korean won pair fell slightly, even as data showed inflation grew less than expected in April.
The Indian rupee pair moved little but traded below April’s record highs.
The dollar held steady after falling overnight, with nonfarm payrolls waiting
The and both were steady in Asian trading, after falling 0.6% in overnight trading.
The pressure on the dollar came amid a sharp rise in the yen, with Fed Chairman Jerome Powell reiterating that the bank will not raise rates further.
Still, the outlook for the dollar remained buoyed by the prospect of Fed rate cuts until at least the fourth quarter.
The focus now turns to April data, due Friday, for more clues about the economy and interest rates.
