Asia FX muted as dollar steadies at over 2-mth peaks on strong data

Investing.com– Most Asian currencies kept to a tight range on Friday as the dollar steadied at more than two-month highs as strong economic data furthered expectations of smaller interest rate cuts.

Regional markets took few cues from Chinese gross domestic product data that showed the economy grew as expected in the third quarter. The yuan firmed slightly after the reading, with focus remaining on more stimulus measures from Beijing. 

The Japanese yen briefly weakened to levels last seen in late-July, although a verbal warning from government officials saw it recoup some losses. 

The dollar index and dollar index futures both fell 0.1% in Asian trade, after racing to an over 2-½ month high on Thursday following stronger-than-expected retail sales data. The reading, coupled with signs of continued resilience in the labor market, saw traders largely maintain bets on a 25 basis point cut by the Federal Reserve in November. 

Chinese yuan firms slightly as GDP meets expectations 

The Chinese yuan’s USDCNY pair fell 0.1% after hitting a near two-month high earlier this week. 

GDP grew 4.6% year-on-year, as expected, albeit at a slower pace than seen in the prior quarter. Quarter-on-quarter growth slightly missed expectations, while year-to-date GDP still remained below the government’s 5% annual target. 

The GDP data, while mildly positive, underscored the need for more economic support from Beijing. The Chinese government had unveiled a slew of stimulus measures over the past three weeks, including both monetary and fiscal measures.

But a lack of clear details on the timing, implementation and scale of the planned measures spurred limited optimism among investors. 

USDJPY flirts with 150 amid mixed CPI, intervention warning 

The Japanese yen firmed slightly after reaching a near three-month low earlier in the session. The USDJPY pair fell 0.2% to 149.88 yen after rising as high as 150.29 yen.

The yen’s muted recovery came after top currency diplomat Atsushi Mimura warned against rapid one-sided moves in the yen, reminding traders of the government’s capacity to intervene in currency markets. 

Consumer price index data showed inflation grew slightly more than expected in September, although it fell from 10-month highs hit in the prior month.

The yen was battered in recent weeks by growing doubts over the Bank of Japan’s plans to hike interest rates further. Japan’s new Prime Minister, Shigeru Ishiba also said the economy could not handle more rate hikes at the moment.

Broader Asian currencies moved in a tight range. The Australian dollar’s AUDUSD pair rose 0.1%, recouping some recent losses. 

The South Korean won’s USDKRW pair rose 0.2%, while the Singapore dollar’s USDSGD pair was flat.

The Indian rupee’s USDINR pair remained close to record highs hit earlier in October.