Investing.com — Most Asian currencies stayed within a tight range on Friday, with the dollar stuck at a near two-month high ahead of key inflation data that is likely to play a role in the Federal Reserve’s interest rate outlook.
The dollar’s strength further weakened the Japanese yen from levels that traders had initially expected to attract government intervention. Mixed inflation data from the Japanese capital gave little support to the currency, nor did repeated government warnings.
Weak sentiment towards China ahead of the main purchasing managers’ indices due this weekend also kept flows into regional markets subdued. The yuan was at its weakest level since October, with little sign of selling pressure on the currency easing.
The Japanese yen weakens further, USDJPY passes 161
Japanese yen weakness continued, with the pair rising 0.2% on Friday, briefly breaching the 161 level.
The pair were now well above the level at which the government had intervened in May. While officials maintained their verbal warnings, the move in the USDJPY pair suggested that no actual intervention had taken place so far.
also showed little increase in inflation. While headline inflation rose, underlying inflation remained well below the Bank of Japan’s 2% annual target.
Weak inflation pressures have raised doubts about how much room the BOJ has to tighten monetary policy – ​​a key factor behind the yen’s recent weakness.
Dollar at 2-month high, PCE data expected
In trading in Asia, inflation rose 0.2% and was at its highest level since late April.
Traders remained largely focused on the dollar ahead of key data, which is the Fed’s preferred inflation gauge.
The figures will be released later on Friday and are expected to show that inflation cooled slightly in May but remains well above the Fed’s annual target of 2%.
The dollar was undeterred by recent data showing some cooling in the US economy, especially in the labor market. Uncertainty about when and by how much the Fed will cut rates kept flows into the dollar strong.
Broader Asian currencies posted steep losses through June amid this uncertainty.
The Chinese yuan pair moved little on Friday, remaining at its highest level since November. The focus was now on Key, which is due to take place this weekend.
The Australian dollar pair fell 0.3% as it gave up some gains following higher-than-expected inflation data this week.
The South Korean won pair fell 0.2% after some stronger-than-expected data.
The Singapore dollar pair rose 0.1%. The Indian rupee pair moved little but remained close to recent record highs.
