Investing.com — Most Asian currencies weakened on Friday as fears of more trade friction between the US and China dented sentiment, with the dollar benefiting from safe-haven demand even as bets on rate cuts persisted.
They recovered a measure of recent losses, rising 0.1% each in Asian trading and on course for their first weekly gain in three. Thursday and Friday’s gains also helped the dollar bounce back from a nearly four-month low as markets continued to bet the Federal Reserve would cut interest rates starting in September.
While the idea had boosted Asian currencies in recent sessions, they retreated on Friday amid concerns about deteriorating US-China relations. Uncertainty about the US presidential race, amid growing calls for President Joe Biden to drop his re-election bid, also kept risk appetite subdued.
Chinese yuan near eight-month low amid trade jitters and growth concerns
The Chinese yuan weakened on Friday, with the pair closing in on levels last seen in November 2023.
The yuan took a hit on recent reports that the US is considering tougher trade sanctions on China’s technology and chip manufacturing sectors, a move that could trigger retaliation from Beijing.
But even before that, the currency was hit by data showing that China’s economy grew less than expected in the second quarter.
This brought the Third Plenum of the Chinese Communist Party fully into focus. While top Chinese officials promised more measures to support growth, they did not provide specific details about the measures.
The Japanese yen weakens after suspected intervention
The Japanese yen weakened on Friday, reversing course after rising sharply against the dollar earlier this week.
The pair rose past 157 yen after falling to around 155 earlier this week. The sharp appreciation of the yen had raised speculation that the Japanese government had intervened in the currency markets, although officials gave little indication of this.
Japanese inflation is softer than expected for June, adding to uncertainty over whether the Bank of Japan will have enough room to raise rates further at a meeting later this month.
Some analysts expect a 10 basis point increase from the BOJ.
Broader Asian currencies weakened as risk appetite remained weak. The South Korean won pair rose 0.2%, while the Singapore dollar pair rose 0.1%.
The Australian dollar pair fell slightly, while the Indian rupee pair reached an all-time high above 83.7 rupees.
India’s persistent trade deficit has been a major pressure on the rupee, leaving the currency with little support despite continued optimism about the Indian economy.
