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HomeLatestAsia FX Weaken Amid Fed Meeting Anticipation; Yen Stalls Post-Suspected Intervention
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Asia FX Weaken Amid Fed Meeting Anticipation; Yen Stalls Post-Suspected Intervention

Asian currencies faced downward pressure on Tuesday as market participants awaited the outcome of the Federal Reserve’s meeting this week, leading to a prevailing bias towards the dollar. Meanwhile, the Japanese yen saw a marginal decline following a rebound attributed to suspected government intervention.

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Throughout April, most regional currencies experienced losses as traders adjusted their expectations regarding the timing of potential interest rate cuts by the Fed. This shift was driven by a series of U.S. inflation readings surpassing expectations.

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In Asian trading, both the dollar index and dollar index futures registered gains of around 0.3%, with investors positioning themselves ahead of the Fed meeting. While the central bank is anticipated to maintain interest rates, it could signal a hawkish stance in response to persistent inflation readings, fostering concerns about a prolonged period of elevated U.S. rates. Consequently, the dollar is on track to record a 1.3% gain for April.

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The Japanese yen exhibited weakness, with the USDJPY pair rising by 0.3% to approximately 156.80 on Tuesday. This movement followed a sharp decline from its 34-year highs above 160 on Monday, prompting speculation about potential intervention by the Japanese government. Although official confirmation of intervention was not provided, traders observed verbal warnings from Japanese officials in recent weeks. Mixed data from Japan, including better-than-expected industrial production but disappointing retail sales figures, contributed to the yen’s softness.

In April, the yen emerged as the worst-performing currency in Asia, with the USDJPY pair posting a nearly 4% increase.

The Australian dollar faced significant losses in Asian trade, with the AUDUSD pair declining by 0.5% after retail sales data fell substantially below expectations. This outcome, coupled with persistent inflation and high interest rates, suggested subdued consumer spending and a dimmer outlook for inflation, prompting traders to revise down expectations for further interest rate hikes by the Reserve Bank of Australia.

The Chinese yuan weakened, with the USDCNY pair rising by 0.2% on Tuesday following mixed purchasing managers index (PMI) data indicating some slowdown in the Chinese economy. Although official manufacturing PMI data revealed a slightly less-than-expected deceleration in activity, non-manufacturing activity expanded at a substantially slower pace than anticipated. Despite a more optimistic outlook from private PMI readings, overall indicators pointed to limited strength in Chinese business activity.

Throughout April, the USDCNY pair posted a 0.3% increase, with persistent efforts from the People’s Bank of China constraining further gains.

Other Asian currencies also experienced weakening on Tuesday, including the South Korean won’s USDKRW pair rising by 0.3% and the Singapore dollar’s USDSGD pair adding 0.1%. The Indian rupee’s USDINR pair approached record highs reached earlier in the month amid caution surrounding the 2024 general elections, offering little respite for the currency.

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