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Asian Currencies Hold Steady Amid Awaited Rate Cues; Yen Unfazed by Intervention Concerns

Asian currencies exhibited minimal movement on Tuesday despite a slight weakening of the dollar, as traders awaited further cues on the U.S. economy and interest rates, maintaining a bias towards the greenback.

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In the past week, regional currencies experienced significant declines against the dollar due to hawkish signals from the Federal Reserve and reduced risk appetite, driving the dollar to over five-month highs. These factors are expected to remain influential in the upcoming week.

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USDJPY Maintains Near 155 Despite Intervention Speculation, BOJ Meeting Anticipation

The USDJPY pair showed little change on Tuesday, remaining close to new 34-year highs above the 155 level. Despite growing speculation about potential intervention by the Japanese government, the yen weakened, with traders monitoring closely for any movement towards the 155 level, which could trigger intervention.

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The yen’s decline comes ahead of a Bank of Japan meeting, where the central bank is anticipated to maintain rates after their first increase in 17 years in March. However, there are expectations for a potentially more hawkish stance from the central bank to support the Japanese currency, particularly considering improvements in Japan’s manufacturing and services sectors as indicated by the Purchasing Managers Index data for April.

Dollar Holds Steady Ahead of GDP and Inflation Data

In Asian trade on Tuesday, the dollar index and dollar index futures showed limited movement, with attention focused on upcoming inflation and economic growth indicators. While the dollar had strengthened significantly in recent weeks, easing concerns over tensions between Iran and Israel tempered some safe-haven demand for the currency.

Upcoming GDP data on Thursday is expected to provide insight into the resilience of the U.S. economy in the first quarter. This will be followed by the release of the PCE price index data on Friday, which is closely watched by the Federal Reserve as an indicator of inflation and is expected to influence the central bank’s interest rate decisions.

Despite some moderation in momentum, the dollar remained near five-month highs reached earlier in April, with reduced expectations of early interest rate cuts by the Federal Reserve prompting increased investor interest in the greenback. This trend continued to exert pressure on most Asian currencies.

Elsewhere in the region, the Australian dollar rose from near five-month lows, with attention turning to forthcoming consumer inflation data for the first quarter. The Chinese yuan and South Korean won remained close to five-month highs, while the Singapore dollar and Indian rupee traded relatively flat, with the latter hovering below recent record highs.

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