Asian currency weak against US inflation; The yen falls as the BOJ shows little support from

3 Min Read — Most Asian currencies weakened on Friday, while the dollar held steady ahead of key inflation data that is expected to play a role in the Federal Reserve’s stance on rate cuts.

While an overnight decline in the dollar due to weaker-than-expected US gross domestic product data provided some relief for Asian units, this was largely offset by continued bets on longer US yields. The dollar also recovered some of its losses in Asian trading.

Japanese Yen Weakens, USDJPY Crosses 156 After BOJ

The Japanese yen underperformed, with the pair rising past 156 to new 34-year highs after comments from the Bank of Japan raised doubts about how much capacity the central bank had to raise rates further.

The BOJ after a historic rise in March. The central bank also predicts higher inflation in the coming years.

But the BOJ is also raising doubts about how much capacity it would have to keep raising interest rates. This led to a largely subdued outlook for the yen.

Softer than expected – released earlier on Friday – further raised doubts about an aggressive BOJ.

Still, losses in the yen were limited by persistent fears of government intervention in the currency markets. An upcoming press conference with the BOJ governor, at 02:30 ET (06:30 GMT), also presented the possibility of more aggressive signals.

Broader Asian currencies also weakened on Friday amid continued fears of longer US yields. The Chinese yuan pair rose slightly and remained close to its recent five-month high.

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The South Korean pair rose 0.4%, while the Singapore dollar pair rose 0.1%.

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The Australian dollar pair was supported by strong inflation data, which, combined with higher data earlier this week, prompted bets on higher-for-longer interest rates in the country.

The Indian rupee pair moved little, with traders growing wary of more volatility in Indian markets as the 2024 general elections began.

The dollar remains stable while PCE inflation is steady

The and rose marginally in Asian trading, paring some overnight losses.

showed that US economic growth slowed more than expected in the first quarter amid persistent inflation and high interest rates.

But inflation remained uncomfortably high and grew more than expected.

This brought the upcoming data into full focus. This value is the Federal Reserve’s preferred inflation gauge.

Despite Thursday’s weak GDP data, traders steadily increased their expectations for any Fed rate cuts in the near term. It now shows that traders won’t price interest rate cuts until September, or the fourth quarter.

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