Asia FX weak as dollar hits 5-mth high on hot CPI; yen intervention in focus

Investing.com  |  Author Ambar Warrick

Published Apr 11, 2024 12:04

Asia FX weak as dollar hits 5-mth high on hot CPI; yen intervention in focus

Investing.com-- Most Asian currencies weakened on Thursday as hotter-than-expected U.S. inflation data put the dollar at a five-month high, while weakness in the Japanese yen saw markets wary of any potential intervention.

Traders were seen largely wiping out bets on a June interest rate cut by the Federal Reserve, presenting more near-term pressure for Asian currency markets.

Soft inflation readings from China also weighed on sentiment, as a deflationary trend in Asia’s biggest economy remained in play.

Dollar at 5-mth high, June rate cut bets vanish 

The dollar index and dollar index futures fell slightly in Asian trade on Thursday after racing to five-month highs in the prior session.

The greenback was boosted chiefly by hotter-than-expected consumer price index data for March, which furthered the notion that U.S. inflation was turning sticky above the Fed’s 2% annual target. 

The reading, coupled with hawkish minutes from the Fed’s March meeting, saw traders largely price out expectations for a June rate cut by the central bank. The minutes also came on the heels of repeated warnings from Fed officials over sticky inflation delaying any potential rate cuts. 

The prospect of higher-for-longer U.S. interest rates presents more upside for the dollar and bodes poorly for high-risk, high-yield Asian currencies. 

Yen intervention in focus as USDJPY tests 153, at 34-year highs 

The Japanese yen strengthened slightly on Thursday, with the USDJPY steadying around 152.86 after surging past 153 in overnight trade. The pair also hit its highest level since 1990. 

But further gains in the USDJPY pair were stemmed by anticipation of currency market intervention by the Japanese government. 

Several top-level finance officials offered up more warnings on potential currency market intervention on Thursday- specifically Vice Finance Minister Masato Kanda. Kanda had led record levels of intervention in 2022, when the USDJPY pair had last tested 1990 levels.

Chinese inflation weakens, USDCNY near 5-mth high

The Chinese yuan tread water on Thursday, although the USDCNY pair still remained close to five-month highs.

But further gains in the USDCNY pair were limited by a strong midpoint fix by the People’s Bank. 

Data on Thursday showed Chinese CPI inflation shrank more than expected in March, while producer price index inflation contracted for an 18th consecutive month, presenting a sustained deflationary trend in Asia’s largest economy. 

Broader Asian currencies stuck to a flat-to-low range. The Australian dollar’s {{|AUDUSD}} pair rose 0.1% after clocking steep overnight losses, while the South Korean won’s USDKRW pair also steadied from an overnight surge. 

The Singapore dollar’s USDSGD pair fell less than 0.1%, while the Indian rupee’s USDINR pair remained close to record highs above 83.

Get The App
Join the millions of people who stay on top of global financial markets with Investing.com.
Download Now

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

Sign out
Are you sure you want to sign out?
NoYes
CancelYes
Saving Changes