Most Asian currencies showed limited movement on Tuesday, while the dollar stabilized as investors awaited key U.S. inflation data scheduled for later this week. Despite repeated warnings of potential government intervention, the Japanese yen edged closer to 152 against the dollar, approaching lows not seen in over three decades.
Traders exercised caution, refraining from significant market moves as they awaited further signals regarding U.S. interest rates. The Asian markets were still digesting the robust nonfarm payrolls report released on Friday, which led to a reduction in expectations of imminent interest rate cuts by the Federal Reserve.
The strength of the dollar, fueled by the positive nonfarm payrolls data, also contributed to the upward pressure on U.S. Treasury yields, consequently exerting downward pressure on Asian currencies.
USDJPY Edges Closer to 152 Despite Intervention Threats
The Japanese yen experienced a slight weakening on Tuesday, with the USDJPY pair moving towards the 152 level, nearing its highest point since 1990.
Despite repeated warnings from Japanese officials about potential intervention to address speculation against the yen, the currency struggled to gain traction. Persistent higher U.S. interest rates, which have weighed on the Japanese yen for an extended period, continued to exert downward pressure.
Even the Bank of Japan’s first rate hike in 17 years failed to provide substantial support to the yen, as the central bank adopted a predominantly dovish stance on future policy decisions.
Dollar Stability Ahead of CPI Data and Fed Minutes
The dollar index and dollar index futures exhibited minimal movement in Asian trading following marginal losses in the previous session. However, investors maintained a predominantly bullish sentiment towards the greenback ahead of crucial U.S. interest rate signals expected later in the week.
The release of consumer price index (CPI) inflation data for March on Wednesday is anticipated to confirm inflation levels remaining comfortably above the Federal Reserve’s 2% target, potentially deterring early rate cuts.
The minutes from the Fed’s March meeting, also scheduled for release on Wednesday, come amid increasing doubts regarding the possibility of rate cuts in June. Several Fed officials cautioned that persistent inflationary pressures would likely delay any rate adjustments.
The general cautious sentiment in the market kept most Asian currencies range-bound on Tuesday. The Australian dollar and the Chinese yuan faced downward pressure due to weakening consumer sentiment and doubts surrounding China’s economic recovery, respectively.
Similarly, the South Korean won weakened slightly, while the Singapore dollar maintained stability. The Indian rupee remained relatively unchanged, hovering near record highs against the dollar.