Investing.com — Most Asian currencies traded in narrow ranges on Friday as the dollar hovered near a two-month high ahead of the release of a key inflation reading that is likely to influence the Federal Reserve’s interest rate outlook.
The dollar’s strength pushed the Japanese yen further below the level at which traders had initially expected government intervention. Mixed inflation readings from the Japanese capital did little to support the Japanese yen, even as repeated warnings from the government failed to shore it up.
Sentiment toward China was weak ahead of the release of key purchasing managers’ indexes over the weekend, limiting capital inflows into the regional market. The yuan is at its lowest since October and shows little sign of easing selling pressure on the currency.
Japanese Yen Falls Further, USDJPY Exceeds 161
The Japanese yen continued to weaken, rising 0.2% on Friday to briefly surpass 161 yen.
The pair is well above the levels that prompted government intervention in May. Government officials continue to issue verbal warnings, but the movement of the USDJPY pair suggests that no actual intervention has been forthcoming so far.
Inflation has also barely picked up: Headline inflation has risen, but underlying inflation remains well below the Bank of Japan’s 2% annual target.
The sluggish inflation rate has further deepened doubts about how much room the Bank of Japan has to tighten monetary policy, a key driver of the yen’s recent weakness.
Dollar hits 2-month high awaits PCE data
Asian markets rose 0.2 percent to their highest level since late April.
Traders remained largely biased toward the dollar ahead of the release of key data on inflation, a key indicator for the Fed.
The report, due to be released later on Friday, is expected to show that inflation fell slightly in May but remained well above the Fed’s 2% target for the year.
Recent data showing a slowdown in the U.S. economy, particularly the labor market, has kept the dollar from falling too much, while inflows into the dollar have remained strong amid uncertainty about when and how much the Fed will cut interest rates.
Amid this uncertainty, Asian currencies across the board suffered sharp declines throughout June.
The Chinese yuan was little changed against the dollar on Friday, remaining at its highest level since November, as attention shifts to major currencies set for release over the weekend.
The Australian dollar fell 0.3 percent, giving up gains following this week’s higher-than-expected inflation figures.
The South Korean won fell 0.2% after the better-than-expected data.
The Singapore dollar rose 0.1%. The Indian rupee was little changed but remained near recent highs.
