May 3 2024: Asian currencies showed slight gains on Friday as the dollar weakened, with markets bracing for key U.S. payrolls data that could influence interest rates. Meanwhile, the Japanese yen rebounded, distancing itself from recent lows amidst suspected government intervention in currency markets.
The dollar’s retreat and the yen’s recovery provided some relief to regional currencies, although concerns about prolonged high U.S. interest rates kept overall sentiment cautious.
Yen Strength and USDJPY Decline
On Friday, the Japanese yen continued its upward trajectory, leading to a 0.4% drop in the USDJPY pair, which touched a three-week low of 152.9. This week’s losses for USDJPY amounted to approximately 3.4%, a sharp reversal from recent highs attributed partly to Japanese government intervention in forex markets.
Market observers noted that the 160 level has become a focal point for currency intervention strategies, influencing the yen’s recent movements. Despite domestic markets being closed on Friday, lower trading volumes contributed to the yen’s gains.
Asian Currency Landscape
Other Asian currencies also experienced modest gains, benefiting from the dollar’s overnight decline. The Australian dollar, represented by the AUDUSD pair, rose 0.2%, anticipating potentially hawkish signals from the Reserve Bank of Australia in the upcoming week. Strong Australian inflation data led markets to rethink expectations of RBA rate cuts in 2024, bolstering the Aussie’s position.
In contrast, the South Korean won’s USDKRW pair and the Singapore dollar’s USDSGD pair saw slight dips of 0.3% and 0.1%, respectively. The Indian rupee’s USDINR pair remained below record highs seen in April.
Dollar Stability and Focus on Payrolls
The dollar index and futures stabilized in Asian trading following overnight losses, impacted by yen strength and expectations of no immediate Fed rate hikes. Market attention turned to the forthcoming nonfarm payrolls data for April, a key indicator influencing the Fed’s rate decisions. Positive labor market readings could reinforce the Fed’s stance on maintaining high interest rates amidst persistent inflation concerns.
