Investing.com — Most Asian currencies fell Wednesday as the dollar gained more ground following recent declines, while the yen fell sharply after Bank of Japan officials played down expectations of interest rate hikes.
Sentiment towards regional markets remained fragile, especially after concerns about a US recession led to a decline in risk-based assets this week.
The and rose 0.3% each in Asian trading, partly benefiting from yen weakness and amid some expectations that U.S. economic growth will not deteriorate as dramatically as markets fear.
The Japanese yen falls as the BOJ plays down bets on interest rate hikes
The Japanese yen was by far the worst performer in Asia, with the pair up almost 2% to around 147 yen. The pair returned to the 150 yen level after falling to a low of 141 yen last week as the yen was helped by a mix of safe-haven demand and aggressive signals from the BOJ.
But the yen erased much of its recent gains after BOJ Deputy Governor Shinichi Uchida said the bank will not raise rates if markets are unstable.
His comments came amid wild swings in Japanese stock markets over the past two days, with the yen also registering volatile moves. They also undermined the BOJ’s earlier message that interest rates may rise unchecked this year.
Still, the yen remained well above the 38-year low reached this year, and more support is expected to come as Japan’s economy improves on higher wage growth.
The Australian dollar is outperforming the aggressive RBA
The Australian dollar was the best performer in Asia, with the pair up 0.7% in sustained gains from the previous session.
The gains in the Aussie came after holding rates steady on Tuesday but struck a hawkish chord, citing concerns about persistent inflation.
The RBA’s comments show that traders have fully priced in expectations for rate cuts in 2024 and that rates will remain high for longer.
ANZ analysts said the RBA won’t start cutting rates until February 2025, much later than most major central banks. But such a scenario benefits the Australian.
Chinese Yuan Weak After Mixed Trade Data
The Chinese yuan extended losses slightly after mixed trading data, with the pair rising 0.4%.
China’s shrank much more than expected in July, undermined by disappointing figures after the European Union imposed steep import tariffs on Chinese electric vehicles earlier in July.
But the Chinese exceeded expectations, fueling some bets on a recovery in local demand.
The focus now is on Chinese, later this week.
Broader Asian currencies weakened mainly as sentiment remained fragile. The South Korean won pair rose 0.1%, while the Singapore dollar pair rose 0.3%.
The Indian rupee pair hit a new record high of 84,048 rupees despite continued measures by the Reserve Bank to support the currency.
