Investing.com–Most Asian currencies moved into a flat-to-low range on Thursday as stock market turmoil kept traders largely averse to risk-driven assets, while the dollar retreated above key economic indicators in coming days.
The Japanese yen remained an outlier, rising to its strongest level against the dollar in more than two months as a weakening carry trade, increased demand for safe havens and expectations of a Bank of Japan interest rate hike boosted the currency .
Concerns about China also prompted caution on Asia, as surprise interest rate cuts by the People’s Bank did little to improve sentiment. The yuan held near its weakest level in eight months, while China-exposed currencies such as the Australian dollar and New Zealand dollar saw extended selling.
The yen rises as the carry trade diminishes and the BOJ approaches
The Japanese yen continued to outperform its regional peers, with the pair falling 1% to 152.38 yen, its lowest level since early May.
The yen’s initial gains were fueled by a suspected currency market intervention by the Japanese government earlier in July. But this put pressure on short positions on the yen, leading to a prolonged rally in the currency outside of apparent government intervention.
The yen’s strength also came ahead of next week, when policymakers are expected to consider a 10 basis point rise amid some signs of resilience in the Japanese economy.
Dollar Eases on GDP, PCE Data Available
The and both fell slightly in Asian trading, extending their overnight decline amid rising confidence that the Federal Reserve will cut interest rates in September.
The second-quarter data, due later on Thursday, along with Friday’s data, is expected to provide more clues about possible Fed rate cuts.
The , and is generally intended to keep interest rates stable while signaling a rate cut in September. The dovish rhetoric from Fed officials in recent weeks has furthered this idea.
But broader Asian currencies saw little relief from a weaker dollar or the prospects of lower interest rates as risk appetite remained largely muted.
The Chinese yuan pair hovered around an eight-month high amid persistent concerns about a slowing economic recovery in the country. Surprise interest rate cuts by De Volksbank increased pressure on the currency and did little to lift sentiment about the Chinese economy.
Concerns over China caused the Australian dollar pair to fall 0.4% to a nearly three-month low, while the New Zealand dollar pair lost 0.2%.
The South Korean won pair rose 0.4%, with sentiment towards the country also hurt by weaker-than-expected second-quarter GDP data.
The Singapore dollar pair moved little in some safe-haven trades, while the Indian rupee pair hovered just below a record high of over 83.8 rupees.
