Investing.com — Most Asian currencies stayed within a tight range on Friday as the dollar posted recent gains ahead of key inflation data that is likely to play a role in the outlook for interest rates.
The Japanese yen showed some strength, moving closer to early-month levels as strong inflation data from Tokyo strengthened the case for a hawkish Bank of Japan.
The Chinese yuan reached its strongest levels in 2024, as news of more positive policy measures from Beijing fueled a broader recovery in local markets.
Most regional currencies were still on track for gains in August, while the dollar fell to a 13-month low amid growing belief that the Federal Reserve will cut interest rates in September. But this trade cooled moderately this week.
The dollar is recovering weekly, PCE data was expected
The and both remained steady in Asian trading, poised for their first positive week in five weeks. But the dollar was still 2.6% lower in August, its worst month since November 2023.
The dollar was helped by continued signs of US economic resilience after data released on Thursday showed the economy grew more strongly in the second quarter than initially expected.
data – the Fed’s preferred inflation gauge – will be released later on Friday and is also expected to show that inflation rose slightly in July.
A strong economy and persistent inflation give the Fed less incentive to cut rates sharply. While traders still maintained expectations for an easing in September, they were more focused on a smaller cut of 25 basis points, it showed.
Japanese Yen Strengthens as Tokyo CPI Beats Expectations
The Japanese yen rose on Friday, with the pair down 0.1% to 144.84 yen. The pair was close to the lows seen in early August, during the height of pro-yen trading.
showed inflation grew slightly stronger than expected in August, with core inflation returning towards the Bank of Japan’s annual target of 2%, while private spending improved.
This reading promoted the idea that rising inflation will give the BOJ more room to raise rates further this year. The CPI value also helped markets look past disappointments and negative results.
Chinese Yuan Hits 2024 Peak on Stimulus Hopes and PBOC Support
The Chinese yuan strengthened on Friday, with the pair hitting its lowest level since late December.
The yuan, along with broader Chinese markets, was buoyed by news that Beijing planned to refinance $5.4 trillion in mortgages, which would be a shot in the arm for the real estate market, which is at the heart of China’s economic downturn.
But a key support for the yuan was a series of strong midpoint fixes by the People’s Bank, which took action to protect the Chinese currency from further losses.
Broader Asian currencies moved in a tight range, with traders on edge over US inflation data.
The Australian dollar pair rose 0.1% and was close to a one-month high. the numbers are weaker than expected for July, cooling after two months of strong growth.
The South Korean won pair rose 0.1%, while the Singapore dollar pair was flat.
The Indian rupee pair moved further away from the 84 rupee level, but still remained close to the record highs seen earlier in August.
