Investing.com– Most Asian currencies fell slightly on Friday as traders turned cautious amid increased volatility in the Japanese yen, which sparked speculation over whether the government had intervened in markets.
Losses in regional units were muted as the dollar steadied at a one-month low, after softer-than-expected U.S. consumer price index inflation data ramped up optimism over interest rate cuts.
But sentiment towards Asia was held back by volatility in the yen, while markets also digested mixed trade figures from China.
Japanese yen volatile after USDJPY tumbles from 161; intervention in focus
The Japanese yen was volatile in Friday trade, with the USDJPY pair rising 0.2% to about 159.18 yen.
The pair slid over 2% on Thursday after the soft U.S. CPI report, dropping from levels close to a 38-year high, which it had hit earlier in July.
But the sharp drop in the yen sparked questions over whether the Japanese government was actively intervening in currency markets. Officials gave scant cues on the matter, even after offering a string of warnings in recent weeks over betting aggressively against the yen.
Data on the Bank of Japan’s balance sheet, due later in July, is expected to offer more clarity on whether the government did intervene. Traders also speculated whether short positions on the yen were squeezed by a sharp decline in the dollar, following the weak CPI reading for June.
Dollar near 1-mth low as soft CPI spurs rate cut bets
The dollar index and dollar index futures steadied on Friday after tumbling to a one-month low in overnight trade.
The greenback was battered by softer-than-expected CPI data, which showed inflation cooled a smidge more than expected in June.
The reading ramped up bets that the Federal Reserve will have more confidence to begin cutting interest rates.
Traders were seen pricing in a 83.4% chance the Fed will cut rates in September, compared to a 64.7% chance seen last week, according to CME Fedwatch.
Chinese yuan soft amid mixed trade data
The Chinese yuan weakened slightly on Friday, with the USDCNY pair rising 0.1% tumbling sharply in the prior session. But the yuan remained in sight of its weakest levels since November.
Trade data on Friday spurred more uncertainty over the Chinese economy. China’s trade surplus grew more than expected in June to a near two-year high, while exports surged past expectations.
But Chinese imports unexpectedly shrank in the month as local demand remained weak.
This drop raised concerns over weak consumption and sluggish growth in Asia’s largest economy, especially after weak consumer inflation figures released earlier this week showed Chinese disinflation remained in play.
Broader Asian currencies moved in a flat-to-low range after seeing some overnight gains. The South Korean won’s USDKRW pair rose 0.5%, while the Singapore dollar’s USDSGD pair added 0.1%, as data showed Singapore’s gross domestic product grew more than expected in the second quarter.
The Australian dollar’s AUDUSD pair rose 0.1%, while the Indian rupee’s USDINR pair moved little.
This post is originally published on INVESTING.
