Most Asian currencies remained stable on Friday as the dollar held steady at more than two-month highs due to strong economic data, which reinforced expectations of smaller interest rate cuts.
Regional markets were largely unaffected by Chinese gross domestic product data showing expected growth in the third quarter. The yuan slightly strengthened after the data release, with attention still focused on potential stimulus measures from Beijing.
The Japanese yen briefly weakened to levels last seen in late July, but rebounded after a verbal warning from government officials.
The Australian dollar and South Korean won both dropped by 0.1% in Asian trading after reaching over 2-½ month highs on Thursday following positive economic data. Traders mostly maintained expectations for a 25 basis point rate cut by the Federal Reserve in November.
Chinese yuan strengthens slightly as GDP meets expectations
The Chinese yuan’s pair fell by 0.1% after reaching a near two-month high earlier in the week.
China’s GDP grew by 4.6% year-on-year, in line with expectations but at a slower pace than the previous quarter. Industrial production slightly missed expectations, while retail sales remained below the government’s 5% annual target.
Although the GDP data was mildly positive, it highlighted the need for additional economic support from Beijing. The Chinese government has introduced various stimulus measures in recent weeks, including both monetary and fiscal policies.
However, the lack of clear details on the timing, implementation, and scale of these planned measures has limited optimism among investors.
USDJPY approaches 150 amid mixed CPI data and intervention warning
The Japanese yen strengthened slightly after hitting a near three-month low earlier in the day. The USDJPY pair dropped by 0.2% to 149.88 yen after reaching as high as 150.29 yen.
The yen’s modest recovery came after top currency diplomat Atsushi Mimura cautioned against rapid one-sided movements in the yen, reminding traders of the government’s ability to intervene in currency markets.
CPI data showed that inflation slightly exceeded expectations in September, although it was lower than the 10-month highs reached in the previous month.
The yen has been under pressure in recent weeks due to doubts surrounding the Bank of Japan’s plans to raise interest rates further. Japan’s new Prime Minister, Shigeru Ishiba, also stated that the economy is not ready for additional rate hikes at this time.
Other Asian currencies traded within a narrow range. The Australian dollar’s pair rose by 0.1%, recovering some recent losses.
The South Korean won’s pair increased by 0.2%, while the Singapore dollar’s pair remained unchanged.
The Indian rupee’s pair stayed close to the record highs reached earlier in October.