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Asia FX muted, Japanese yen pauses losses after BOJ warning

Published 09/05/2024, 04:44

Investing.com-- Most Asian currencies moved in a flat-to-low range on Thursday as markets sought more cues on U.S. interest rates from Federal Reserve officials and upcoming inflation data. 

The Japanese yen saw some resilience, with the USDJPY pair pausing its recent decline after somewhat hawkish comments from the Bank of Japan. Traders were also on guard over any more intervention in currency markets by the government. 

Broader Asian currencies were muted as the dollar rebounded from recent losses this week, as a string of Fed officials warned that sticky inflation was likely to keep interest rates high for longer. 

Japanese yen pauses losses, USDJPY hovers above 155

The Japanese yen’s USDJPY pair- which is inversely representative of strength in the yen- hovered around the mid-155s on Thursday, pausing its recent run of losses.

The pause came after BOJ Governor Kazuo Ueda warned that any inflationary pressures arising from weakness in the yen could invite monetary tightening by the central bank- changing his stance after stating last month that the yen’s recent declines did not directly impact inflation.

Ueda’s comments were sufficient in stemming losses in the yen, which was weakening even after the Japanese government seemingly intervened in currency markets last week.

Still, weak wage growth data for March spurred doubts over just how much headroom the BOJ actually had to tighten policy. 

Chinese yuan trims losses as imports surge

The Chinese yuan’s USDCNY trimmed some intraday gains after data showed Chinese imports grew substantially more than expected in April, signaling some strength in domestic demand.

While exports also beat expectations, the spike in imports saw China’s trade balance grow less than expected. Still, the trade balance grew from a four-month low hit in the prior month. 

While increased imports usually bode poorly for currencies, the yuan was supported by optimism over a potential economic recovery in China, which was supporting local consumption. 

Dollar steadies with Fed speakers, inflation data on tap 

Broader Asian currencies were muted, as the dollar index and dollar index futures steadied after a strong rebound this week. 

Focus was squarely on more Fed speakers on Thursday and Friday, as well as key consumer price index data due next week.

Doubts over U.S. interest rates kept most Asian currencies trading sideways on Thursday. The Australian dollar’s AUDUSD pair rose less than 0.1%, while the Singapore dollar’s USDSGD and the South Korean won’s USDKRW pairs were flat.

The Indian rupee’s USDINR pair moved little, but remained in sight of record highs hit in late-April.

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