Asia FX on guard before payrolls data, yen rebounds amid likely intervention

Investing.com-- Most Asian currencies rose slightly on Friday, capitalizing on a drop in the dollar as markets hunkered down before key U.S. payrolls data that is likely to factor into interest rates. 

The dollar was also pressured by a rebound in the Japanese yen, which pulled further away from 34-year lows amid what appeared to be government intervention in currency markets. 

Weakness in the dollar offered some breathing room to regional currencies, although they were still nursing steep losses on the prospect of U.S. interest rates remaining high for longer. 

Japanese yen firms amid likely intervention, USDJPY at 3-week low

The Japanese yen saw extended gains on Friday, with the USDJPY pair- which moves inversely to strength in the yen- falling 0.4% to 153.02. The pair briefly hit a three-week low of 152.9. 

The USDJPY pair was set to lose about 3.4% this week as it tumbled from 34-year highs. Traders and analysts attributed the drop largely to currency market intervention by the Japanese government.

The USDJPY pair had surged to 160 earlier this week. Traders said this level was the new line in the sand for currency market intervention. 

Domestic Japanese markets were closed on Friday. But the lower volumes also aided the yen. 

Still, the factors that had spurred recent yen weakness remained in play, chiefly the prospect of high-for-longer U.S. interest rates. 

Broader Asian currencies rose slightly, capitalizing on an overnight drop in the dollar. The Australian dollar’s AUDUSD pair rose 0.2%, as markets positioned for potentially hawkish signals from the Reserve Bank of Australia next week. Hotter-than-expected Australian inflation readings saw markets largely price out expectations of any rate cuts by the RBA in 2024, offering the Aussie some strength. 

Trading volumes in Asia remained muted on account of market holidays in Japan and China.

The South Korean won’s USDKRW pair fell 0.3%, while the Singapore dollar’s USDSGD pair fell 0.1%.

The Indian rupee’s USDINR pair fell slightly, and was trading well below record highs hit in April. 

Dollar steadies from overnight losses, nonfarm payrolls awaited 

The dollar index and dollar index futures steadied in Asian trade after tumbling in overnight trade, as pressure from the yen and expectations of no more interest rate hikes by the Federal Reserve dented the greenback. 

Focus was now squarely on nonfarm payrolls data for April, which is due later in the day. The reading has consistently beaten estimates for the past five months, with any signs of persistent labor market strength giving the Fed more headroom to keep rates high for longer.

The Fed signaled earlier this week that it had no plans to cut rates in the near-term, especially in the face of sticky inflation.