Asian FX firms with Powell in focus; yen rises as BOJ’s Ueda talks raise rates By Investing.com

Investing.com– Most Asian currencies strengthened on Friday as the dollar’s rally cooled ahead of an upcoming address by Federal Reserve Chairman Jerome Powell, where he is expected to offer more hints on interest rate cuts.

The Japanese yen was the best performer in Asia, extending a rally seen earlier this week after BOJ Governor Kazuo Ueda struck some kind notes during a parliamentary hearing. His comments also showed that markets were looking past the somewhat average inflation data for July.

Broader Asian currencies advanced but were set for a subdued weekly performance as optimism over lower US interest rates was offset by renewed concerns about slowing economic growth.

Japanese yen rises as Ueda says rates are too low

The Japanese yen strengthened on Friday, with the pair down 0.4%. The pair was set to fall 1.3% this week.

The BOJ’s Ueda said short-term interest rates are still too low and need to be raised further to reach neutral levels. He also reiterated the bank’s recent message that it will raise interest rates further if inflation remains flat.

Ueda’s comments boosted the yen, which has been on a tear since the central bank raised rates by 15 basis points in late July. The prospect of higher rates presents more upside for the yen.

But that notion was somewhat offset by mixed consumer price index data for July. While both CPI and CPI rose, a key print of core inflation, which is closely watched by the BOJ, fell below 2%, raising doubts about how much room the BOJ has to raise.

Dollar falls with Powell talking on the tap

And both fell about 0.2 percent in Asian trade as a rebound from seven-month lows dried up.

The focus is now on an address by the Fed’s Powell at the Jackson Hole Symposium on Friday, where he is expected to provide more clues about interest rates and the economy.

Powell’s address also comes as weak labor data earlier this week raised fresh concerns that a shrinking labor market will bring a US recession.

Markets were still divided between a 25 or 50 basis point cut in September, it said.

Broader Asian currencies rose on Friday and were set for a midweek, despite the dollar’s recent losses.

The Chinese yuan pair was down 0.1%, while the Australian dollar pair was up 0.2%.

The South Korean won pair fell 0.3%, while the Singapore dollar pair was unchanged.

The Indian rupee pair stabilized after retesting levels above 84 rupees earlier in the day.