Investing.com — Most Asian currencies rose slightly on Friday, recovering further as the dollar weakened ahead of key payroll data, while the Japanese yen rose sharply amid speculation about possible government intervention.
Elsewhere, the parties consolidated a slight lead with the Labor Party heading for a comfortable victory in the UK general election.
The U.S. dollar fell to a three-week low in holiday trading, while growing expectations of interest rate cuts also dented the greenback. The focus was now squarely on key data, due later on Friday, for more clues on interest rates.
While a softer dollar helped Asian markets, gains were limited as a potential escalation of tensions between China and Taiwan dented sentiment.
Japanese Yen Strengthens Sharply, USDJPY Drops Amid Intervention Talk
The Japanese yen was among the best performers in Asia, with the pair, which measures the amount of yen needed to buy one dollar, down 0.4% to 160.63.
The yen’s sharp rise led to speculation about whether the Japanese government had intervened in the currency markets to support the currency. It was expected that the government might intervene around the July 4 US market holiday, taking advantage of lower trading volumes.
The yen’s recent weakness has been fueled by growing expectations that the Bank of Japan will have limited room to tighten policy further amid continued weakness in the Japanese economy.
Weak data for May reinforced this idea on Friday.
Chinese Yuan flat as tensions rise in Taiwan
The Chinese yuan lagged its peers and hovered around a seven-month low.
Sentiment towards China was further damaged by reports that Beijing had seized a Taiwanese fishing trawler and also deployed aircraft around the Taiwan Strait.
The reports came after an earlier report that Taiwanese companies were withdrawing their staff from China after Beijing imposed strict penalties on supporters of an independent Taiwan.
Any escalation of tensions with Taiwan could lead to increased scrutiny of China, which could lead to more sanctions from the West.
The Taiwan dollar pair fell 0.2%.
Other Asian currencies advanced slightly as the US market holiday provided little trading cues. The Australian dollar pair rose 0.1%.
The South Korean won pair fell 0.1%, while the Singapore dollar pair fell 0.1%.
The Indian rupee pair fell slightly but remained close to recent record highs.
