Asia FX muted with nonfarm payrolls in sight; Yen scales 4-mth peak

Investing.com - Most Asian currencies moved little on Friday as traders positioned for a potentially softer U.S. nonfarm payrolls reading, while the yen sat near a four-month high to the dollar tracking hawkish signals from the Bank of Japan. 

The yen was the best-performing Asian currency this week, up over 2% after BOJ Governor Kazuo Ueda signaled that the central bank was considering an eventual move away from negative interest rates. 

The yen rose 0.2% to 143.88 against the dollar on Friday. 

Ueda’s comments, made during an address on Thursday, sparked a sharp reversal in bets for more weakness in the yen, while reinforcing expectations that the BOJ will end its negative rate regime in 2024.

This helped the yen strengthen past data showing that Japan’s economy shrank more than initially estimated in the third quarter. Ueda also noted that policy will remain loose in the near-term to keep supporting the Japanese economy. 

Dollar weakens as markets bet on softer nonfarm payrolls 

Broader Asian currencies were muted, while the dollar reversed a recent rebound following a string of soft labor market readings this week.

The dollar index and dollar index futures steadied in the mid-103s in Asian trade, after falling sharply on Thursday.

Job openings and private payrolls readings suggested that the U.S. labor market was cooling, potentially setting the scene for a softer nonfarm payrolls reading for November, which is due later in the day. 

Any signs of a cooling labor market give the Federal Reserve less impetus to keep interest rates higher for longer. Friday’s reading also comes just days before the Fed’s final meeting for the year, where the central bank is expected to keep rates on hold.

But markets were still seeking more cues on when the Fed could begin cutting rates in 2024. Expectations that rate cuts could come as soon as March 2024 had boosted Asian currencies in recent sessions. 

Most regional units moved little in anticipation of the payrolls reading. The Chinese yuan fell 0.1%, and was set for mild weekly losses amid persistent concerns over an economic slowdown in China. Dollar selling by Chinese state banks helped limit losses in the yuan this week. 

The Indian rupee was flat after the Reserve Bank of India kept rates on hold as widely expected, and said that monetary policy will remain restrictive to curb persistent risks from inflation. 

The Australian dollar rose 0.2%, but was set to lose 0.8% this week following a string of weak economic readings. A slowdown in China, Australia’s biggest export market, appeared to be spilling over into the country.