Asian currencies fall, dollar nears 7-month low after weak CPI data by Investing.com

Investing.com– Most Asian currencies held in a tight range on Thursday after posting strong gains overnight as U.S. consumer inflation data read weaker than expected and pushed the dollar near record lows from seven months.

Sentiment towards regional markets was also supported by positive economic readings from Japan, Australia and, to some extent, China.

And they settled around the mid-102 level in Asian trade, remaining close to seven-month lows.

data on Wednesday read slightly less than expected, raising bets on a rate cut in September. But traders became more biased towards a 25bps cut over a 50bps cut as the CPI data showed yet another month-on-month rise.

That notion capped gains in most Asian currencies, although broader risk-based markets, particularly equities, rallied sharply.

Japanese yen steady as Q2 GDP beats expectations

The Japanese yen steadied on Thursday after an average performance in overnight trade as improved risk sentiment undermined safe-haven demand for the currency. The pair settled around 147.25 yen.

data showed that Japan’s economy grew more than expected in the second quarter, helped by a rebound as Japanese wages rose.

The reading is linked to the Bank of Japan’s view that improving wages will boost the Japanese economy, giving the central bank more room to continue raising interest rates this year.

Such a scenario heralds more strength for the yen, which has already been in a stellar rally against the dollar over the past month.

China’s yuan weakens amid mixed economic signals

The Chinese yuan weakened on Thursday, with the pair up 0.2%, as a number of readings presented a mixed picture of the Chinese economy.

China grew more than expected, inspiring some confidence in improving consumer spending and inflation.

But it grew less than expected, as did . China also unexpectedly rose to 4.2%.

The readings showed that while some policy measures from Beijing helped consumer spending, the overall economy remained under pressure.

Australian dollar rises on strong jobs data

The Australian dollar was the best performer in Asia, with the pair up 0.5% after data showed a huge rise for the second consecutive month in July.

The reading indicated Australia’s labor market was hot despite a broader economic slowdown, potentially supporting inflation and giving the Reserve Bank of Australia more room to keep interest rates high.

Traders speculated that the RBA could even raise interest rates further to cool the labor sector, after Governor Michele Bullock warned last week that the central bank was open to raising rates further to combat stuck inflation.

Broader Asian currencies were off amid market holidays in South Korea and India.