Investing.com — Most Asian currencies weakened Thursday as the dollar rose from a seven-month low amid some buying, although traders remained largely biased against the greenback on expectations of rate cuts.
The Japanese yen weakened after surging this week, although sentiment towards Japan was supported by positive purchasing managers’ index data.
Broader Asian currencies also posted some gains this week, amid growing belief that the Federal Reserve will cut interest rates from September. But weak labor market data released on Wednesday left risk sentiment somewhat unsettled as fears of a US recession returned.
Dollar rebounds from seven-month low; interest rate cuts, recession in focus
The and both rose 0.2% in Asian trading, recovering from three days of steep losses that left the dollar at a seven-month low.
The dollar’s weakness came amid growing expectations of a rate cut in September, with the late July Fed meeting released on Wednesday showing most policymakers favored lower interest rates.
A sharp downward revision to US payroll data for the year to March 2024 called for lower interest rates. But the revision also led to renewed concerns that a slowing labor market would be a sign of a recession in the US, especially as payroll data in recent months has also been weak.
The focus now is on a speech at the Jackson Hole Symposium on Friday for more clues about the economy.
The Japanese yen remains stable while the PMI points to growth in the services sector
The Japanese yen fell slightly on Thursday but retained much of its gains this week as economic data fueled expectations of more rate hikes from the Bank of Japan. The pair has been hovering around the mid-145 yen level.
Data from the Purchasing Managers’ Index showed Japan’s economy grew steadily for the second month in a row, causing a contraction in .
The strength of the services sector was also driven by improved local demand, while private consumption picked up against a backdrop of rising wages. This in turn raised the outlook for inflation, which could lead to more rate hikes by the BOJ.
The Japanese are due to appear on Friday and are expected to provide more signals about the economy.
Broader Asian currencies remained subdued as markets weighed the prospect of a US recession against lower interest rates.
The Chinese yuan pair was flat, while the South Korean won pair rose 0.2% after keeping rates unchanged, marking the prospect of a rate cut later this year.
The Australian dollar pair fell 0.1%, cooling after a recent rally, while the Singapore dollar pair rose 0.1%.
The Indian rupee pair rose slightly and remained close to a record high.
