Asia FX sees some relief as dollar retreats, yen at 34-year lows

Investing.com-- Most Asian currencies rose slightly on Wednesday, as weakness in the dollar offered some relief to regional markets, although underperformance in the Japanese yen persisted despite fears of government intervention.

The greenback retreated further from recent five-month peaks this week on some soft purchasing managers index data. But persistent bets on higher-for-longer U.S. interest rates and anticipation of more key economic readings kept traders largely biased towards the dollar. 

Yen weak as USDJPY heads towards 155 

But the Japanese yen saw little relief from a softer dollar, with the USDJPY pair trading near 34-year highs and in sight of the 155 level. 

The yen weakened even as a slew of Japanese officials warned of government intervention to support the beleaguered currency. Traders saw USDJPY at 155 as potentially attracting intervention by the government.

Weakness in the yen came ahead of a Bank of Japan meeting this Friday, where the central bank is expected to keep rates unchanged after a historic hike in March. But its outlook on inflation and economic growth will be closely watched. 

Australian dollar rallies on hotter-than-expected inflation 

The Australian dollar’s AUDUSD pair was among the best performers in Asia on Wednesday, up 0.5% at a nearly two-week high.

The currency shot up after consumer price index inflation read stronger than expected for the first quarter, pushing further above the Reserve Bank of Australia’s 2% to 3% annual target. 

The reading gives the RBA more impetus to keep interest rates higher for longer, which bodes well for the Australian dollar. 

Dollar steadies from overnight losses, GDP, inflation data awaited 

The dollar index and dollar index futures moved little in Asian trade after falling sharply on Tuesday, as purchasing managers index data showed unexpected weakness in U.S. business activity. 

But the dollar retained a bulk of its gains made so far in April, as traders priced out expectations of early interest rate cuts by the Federal Reserve.

More key U.S. economic cues are due this week, with first-quarter gross domestic product data due on Thursday, while PCE price index- the Fed’s preferred inflation gauge- is due on Friday. Both readings are widely expected to factor into the central bank’s outlook on interest rates.

Weakness in the dollar offered some relief to Asian currencies, although they were still nursing losses so far in April.

The Chinese yuan’s USDCNY pair steadied close to five-month highs, amid resurgent doubts over a recovery in Asia’s largest economy. But further weakness in the yuan was limited by signs of currency market intervention by the People’s Bank.

The South Korean won’s USDKRW pair fell 0.2%, while the Singapore dollar’s USDSGD pair fell 0.1%.

The Indian rupee’s USDINR pair moved further away from record highs hit last week, but still remained well above the 83 level.