Most Asian currencies firmed on Friday, while the dollar fell amid growing bets that the Federal Reserve will cut interest rates this month, with upcoming nonfarm payrolls data expected to further this notion.
The Japanese yen firmed as U.S. President Donald Trump signed an order implementing a recent trade deal with Tokyo. Strong private spending data also pushed up bets on rate hikes by the Bank of Japan.
Most regional currencies were nursing some losses this week, as appetite for risk-driven markets was dulled by caution over U.S. economic data and interest rates.
Japanese yen firms on trade cheer, strong spending data
The Japanese yen’s USD/JPY pair fell 0.2% to around 148.12 yen.
The currency was buoyed by optimism over a U.S. trade deal, which will entail lower trade duties on Japan’s main exports, such as automobiles. But Japanese exporters still face a 15% universal tariff on shipments to the United States.
Strong household spending and overall wage income data also boosted the yen, as the readings highlighted some resilience in the Japanese economy and pointed to inflation remaining sticky in the near-term.
But the strong spending data also gives the BOJ more impetus to hike interest rates, especially if inflation remains sticky in the coming months.
ING analysts said Friday’s data increased the chances of a 25 basis point hike by the BOJ in October, although uncertainty over the economic impact of U.S. tariffs, as well as increased political volatility in the country could delay this decision.
Focus next week will be squarely on second-quarter Japanese gross domestic product data.
Broader Asian currencies mostly firmed on Friday. The Chinese yuan’s USD/CNY pair fell 0.1%, while the Australian dollar’ AUD/USD pair added 0.2%.
The Singapore dollar’s USD/SGD pair fell 0.2%, while the South Korean won’s USD/KRW pair shed 0.1%.
The Indian rupee’s USD/INR pair hovered above 88 rupees and was close to record highs, as concerns over U.S. tariffs weighed on Indian markets.
Dollar weak as rate cut bets grow ahead of payrolls print
Gains in Asian currencies were spurred chiefly by a weaker dollar, as markets began pricing in an increased chance that the Fed will cut rates later this month.
The dollar index and dollar index futures both fell 0.2% in Asian trade, but were trading up about 0.4% this week.
Still, the dollar stalled in recent sessions amid a raft of weak labor market readings, with job openings and unemployment claims both pointing to a sustained cooling in the sector.
Nonfarm payrolls data, due at 08:30 ET (12:30 GMT) on Friday, is expected to show employment growth remaining languid in August.
Weak labor prints come as several Fed officials said the central bank will consider lowering rates on further cooling in the job market. This saw traders ramp up bets on a cut this month, with Fed Fund futures pointing to a 96.4% chance for a 25 bps cut during the Fed’s September 16-17 meeting, CME Fedwatch showed.
Source :
https://www.investing.com/news/forex-news/asia-fx-advances-as-dollar-retreats-ahead-of-payrolls-test-4225932
