Investing.com — Most Asian currencies firmed on Friday after the dollar’s recovery cooled ahead of an upcoming speech from Federal Reserve Chairman Jerome Powell, where he is expected to give more clues on interest rate cuts.
The Japanese yen was the best performer in Asia, extending a rally seen earlier this week after BOJ Governor Kazuo Ueda struck some hawkish notes during a parliamentary hearing. His comments also showed markets were looking past somewhat mediocre July inflation numbers.
Broader Asian currencies advanced but were set for a subdued weekly performance as optimism about lower US yields was offset by renewed concerns about slowing economic growth.
The Japanese yen rises because Ueda thinks interest rates are too low
The Japanese yen firmed on Friday, with the pair down 0.4%. The pair is expected to fall 1.3% this week.
The BOJ’s Ueda said short-term interest rates are still too low and need to be raised further to reach a neutral level. He also reiterated the bank’s recent message that it will raise interest rates further if inflation remains stable.
Ueda’s comments boosted the yen, which has been in a slump since the central bank raised rates by 15 basis points in late July. The prospect of higher interest rates offers more upside potential for the yen.
But this idea was somewhat offset by the mixed Consumer Price Index inflation numbers for July. While the CPI both rose, a key underlying inflation pressure closely watched by the BOJ fell below 2%, raising questions about how much room the BOJ has to increase.
Dollar falls while Powell talk is on tap
The and both fell about 0.2% in Asian trading after the recovery from seven-month lows dried up.
The focus is now squarely on a speech by Fed Powell at the Jackson Hole Symposium later on Friday, where he is expected to provide more clues about interest rates and the economy.
Powell’s speech also comes as weak labor market data earlier this week sparked renewed concerns that a cooling labor market will trigger a US recession.
Markets were still divided over a 25 or 50 basis point cut in September, it emerged.
Broader Asian currencies drifted higher on Friday and are expected to have a mediocre week despite recent losses in the dollar.
The Chinese yuan pair fell 0.1%, while the Australian dollar pair added 0.2%.
The South Korean won pair fell 0.3%, while the Singapore dollar pair was flat.
The Indian rupee pair held steady after retesting levels above 84 rupees earlier in the day.
