Foreign exchange firms in Asia as discount rate betting dollar pressure; The Japanese yen lags Investing.com

Investing.com– Most Asian currencies strengthened on Friday as lingering bets on U.S. interest rate cuts pushed the greenback into the red for a fourth straight week, while the Japanese yen continued to fall amid improving sentiment risk.

While the dollar rebounded from near seven-month lows on Thursday, it was still headed for weekly losses amid growing belief that the Federal Reserve will cut interest rates in September.

That notion spurred some flows in Asian markets, although uncertainty over China and expectations of a smaller rate cut by the Fed still kept gains in local currencies capped.

Japanese yen weakens as safe-haven demand wanes

The Japanese yen firmed slightly on Friday, but was among the worst performers in Asia this week as increased risk appetite dampened demand for the safe-haven currency.

The yen pair fell 0.2% on Friday, but is up 1.6% this week, with the pair nearing the ¥150 level. It had fallen as low as 141 yen last week amid a fall in risk-based global markets.

Still, the outlook for the yen looked strong, especially as this week’s raw domestic data showed the Japanese economy rebounding on stronger wages. The strength of the economy is expected to give the Bank of Japan more room to raise interest rates further.

Dollar heads for weekly losses, recession fears ease

And both fell slightly in Asian trade and were set to lose about 0.2 percent this week — their fourth straight week in the red.

Stronger-than-expected data for July provided some strength to the dollar on Thursday while easing recession fears.

But weak inflation data released earlier this week boosted bets that the Fed will cut rates in September, albeit by 25 basis points instead of earlier expectations for a 50 bps cut, according to .

Still, the prospect of lower rates kept the dollar under pressure, while improving risk appetite also spurred flows to higher-yielding currencies.

Among other Asian currencies, the Chinese yuan pair fell 0.2 percent but was set to rise slightly this week. A series of mixed economic readings on China did little to improve sentiment against the yuan, as did assurances of more stimulus from Beijing.

Focus now turns to a decision by the People’s Bank of China on the benchmark next week after the PBOC unexpectedly cut interest rates in July.

The Australian dollar rose 0.2%, while the New Zealand dollar rose 0.5%, even as Reserve Bank of New Zealand governor Adrian Orr signaled interest rate cuts of at least 50 basis points basis this year.

The South Korean won pair was down 0.4%, while the Singapore dollar pair was down 0.1%.

The Indian rupee pair eased slightly but remained within sight of record highs above 84 rupees.