Investing.com – Most Asian currencies were stronger on Thursday. The dollar fell on expectations of a Federal Reserve rate cut, while the yen weakened as investors looked wary of potential government intervention.
But Asian currencies’ gains were tempered by hawkish signals from the Federal Reserve’s June meeting minutes, while key wage data due on Friday also kept market attention cautious.
Japanese Yen Slightly Rises, But Intervention Concerns Remain
The Japanese yen found some relief from the dollar’s weakness, falling 0.2% after nearly breaking above the 162 level on Wednesday.
The pair was trading well above 160, the level that last prompted government intervention in May. Traders remained alert for potential intervention in the coming days as Japanese officials reiterated their commitment to defending the yen.
Traders speculated that the government would intervene to take advantage of low trading volumes during the July 4 market holiday in the U.S. The government intervention in May occurred during the Japanese market holiday.
Dollar falls on weak labor data, rising expectations of rate cuts
Both currencies fell about 0.1% in Asian trading Thursday, extending steep overnight losses.
Weaker-than-expected data and weak purchasing managers’ index numbers have boosted bets that the U.S. economy is cooling, and traders are betting that the Fed will soon cut rates.
Soft labor data also fueled bets that Friday’s numbers would be weak.
Traders increased their bets that the Fed will cut rates by 25 basis points in September. Traders see a 66% chance of a September rate cut, up from 59% a day earlier.
Nevertheless, the results of the Federal Reserve’s June meeting showed that policymakers were still not convinced that inflation was declining to levels that would make rate cuts feasible. Some officials still saw higher rates as necessary to bring inflation down.
Several Fed officials, including Chairman Jerome Powell, also warned this week that while the Fed has made progress in curbing inflation, it is not yet confident enough to cut rates.
Still, most Asian currencies rose against the dollar’s weakness. The Australian dollar rose 0.2% despite data showing a smaller-than-expected trade deficit in May due to weak exports.
The Chinese yuan was unchanged and held near a seven-month high as confidence in the Chinese economy waned.
The South Korean won fell 0.4% and the Singapore dollar fell 0.1%.
The Indian rupee has stabilised after reaching record highs this week.
