June 27 2024: Most Asian currencies showed minimal movement on Thursday as traders remained largely inclined towards the dollar in anticipation of key upcoming U.S. economic indicators. Attention was also focused on potential government intervention in the Japanese yen, which has surpassed levels that previously triggered intervention in May.
Market sentiment in Asia was hampered by uncertainty regarding U.S. interest rates and concerns over China’s economy following weak data.
The dollar index and dollar index futures fell slightly during Asian trading but remained close to the near two-month high reached on Wednesday. The market is closely watching the PCE price index data, the Federal Reserve’s preferred inflation gauge, and the first presidential debate scheduled for later on Thursday.
Japanese Yen Weakens, USD/JPY Crosses Intervention Threshold
The Japanese yen strengthened slightly on Thursday, with the USD/JPY pair down by 0.2%, driven partially by stronger-than-expected retail sales data for May. However, the pair had surged past the 160 yen level in overnight trading, a threshold that previously led to government intervention.
In May, when USD/JPY breached 160, the Japanese government intervened heavily in currency markets, selling large amounts of dollars to buy yen and support the currency. This week, Japanese officials reiterated warnings that they would respond to any “excessive” currency moves, though the specifics of any planned intervention remain unclear.
Chinese Yuan Fragile, USD/CNY at Seven-Month High
The Chinese yuan’s USD/CNY pair hovered at a seven-month high on Thursday, following a seventh consecutive weak midpoint fix by the People’s Bank of China. The yuan has faced increased selling pressure recently, particularly amid fears of a trade war with the West after the European Union imposed tariffs on Chinese electric vehicle imports. Sentiment towards China was further dampened by data showing narrowed growth in the country’s industrial profits for May.
Broader Asian Currencies Range-Bound
Other Asian currencies kept to a tight range. The Australian dollar’s AUD/USD pair rose by 0.1%, continuing gains from Wednesday after a hotter-than-expected inflation reading boosted expectations for a rate hike. The South Korean won’s USD/KRW pair fell by 0.2% following sharp gains earlier in the week, while the Singapore dollar’s USD/SGD pair decreased by 0.1%. The Indian rupee’s USD/INR pair remained flat after approaching record highs earlier in the week.