Investing.com — Most Asian currencies weakened Wednesday as anticipating key U.S. inflation data, traders largely favored the dollar, with the Japanese yen close to the level that last prompted government intervention.
The Australian dollar was an outlier for the day, appreciating sharply after warmer-than-expected inflation sparked fears of a rate hike by the Reserve Bank of Australia.
A strong dollar and deteriorating sentiment toward China amid trade war fears weighed on the yuan, while most other Asian currencies also moved lower.
The and recovered slightly in Asian trading and were close to the highest level in two months. The focus this week has largely been on numbers, the Federal Reserve’s favorite inflation gauge.
Japanese yen weak, USDJPY back towards 160
The Japanese yen pair rose 0.1% to 159.80 yen, close to the 160 yen level that prompted intervention in May.
Government officials continued to warn that they would intervene in case of excessive volatility against the yen. This idea kept USDJPY from crossing 160, at least for now.
The yen’s latest weakness followed dovish signals from the Bank of Japan on policy tightening at its June meeting. Fears of high US interest rates also caused traders to go short on the yen and long on the dollar.
Australian dollar companies, AUDUSD rises on hot CPI
The Australian dollar pair jumped 0.5% after inflation data for May came in higher than expected.
These figures showed inflation moving further away from the RBA’s annual target of 2%, prompting speculation that the central bank could raise rates further in 2024.
The figures come just a week after the RBA kept rates steady at its June meeting but took a much more hawkish stance than markets expected. Australian bond yields rose following the CPI data, with traders speculating the RBA could raise rates as early as August.
Broader Asian currencies weakened as anticipation of key US inflation data kept traders favoring the dollar. Concerns about China also kept traders wary of regional markets.
The Chinese yuan pair remained at a seven-month high after another weak midpoint fix from the People’s Bank of China. Increasing pressure on the yuan amid concerns about a trade war with the West saw the PBOC maintain two straight days of weak midpoint fixes.
The South Korean won pair rose 0.1%, while the Singapore dollar pair rose slightly.
The Indian rupee pair rose marginally, but remained below record highs from earlier in June.
