Asian currency weak with US inflation on the horizon; Fear of Chinese tariffs dents yuan By Investing.com

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Investing.com — Most Asian currencies moved little on Friday while the dollar steadied after overnight declines, with the focus shifting squarely to key U.S. inflation data due next week, which will likely provide more clues about interest rates .

The Chinese yuan fell along with currencies with trade exposure to China after multiple reports said the US was preparing to impose more trade tariffs on Beijing.

Regional currencies received little support from a decline in the dollar, as increasing signs of a cooling labor market reinforced expectations that the Federal Reserve will cut interest rates in September.

But the dollar held steady in Asian trading, putting pressure on regional currencies as uncertainty over key US inflation figures next week left traders largely favoring the greenback.

Chinese Yuan Weakens, USDCNY Rises on Rate Reports

The Chinese yuan pair rose 0.1% after multiple reports said US President Joe Biden is considering imposing new sanctions on certain Chinese industries such as electric vehicles and batteries.

While the economic impact of the tariffs was unclear, such measures could provoke retaliation from China, further deteriorating ties between the world’s two largest economies.

Other currencies with trade exposure to China fell following this idea. The Australian dollar pair fell 0.2%, while the Singapore dollar and South Korean won pairs lost 0.1% and 0.3% respectively.

The Japanese yen remains vulnerable, USDJPY is approaching 156

Japanese yen weakness continued this week as the pair recovered much of the losses it suffered after the government’s apparent intervention in currency markets last week.

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The USDJPY pair rose 0.2% to 155.73 yen, trading well above the low of 152 it reached earlier in May. Traders now saw 160 yen as the new limit for Japanese government intervention.

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Household spending data for March, released earlier on Friday, showed some resilience – a trend that could potentially support Japanese inflation expectations.

Dollar Stable, Poised for Weekly Gains Ahead of Inflation Data

The and rose slightly in Asian trading, recovering some degree of overnight losses. But the dollar still rose about 0.2% this week.

The dollar fell on Thursday after data showed a bigger-than-expected rise on the week, reinforcing expectations of a cooling US labor market.

This reinforced some expectations that the Fed will cut rates in September.

But persistent inflation remained a major point of contention for the Fed, and a slew of officials warned about it this week.

Their comments put a spotlight on the upcoming data, due next week, for more signals on interest rates.

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