Most Asian currencies remained within a narrow trading range on Friday, as the U.S. dollar steadied at over two-month highs. Strong U.S. economic data fueled expectations of smaller interest rate cuts, keeping the dollar strong.
Chinese Yuan Strengthens After GDP Meets Expectations
China’s third-quarter GDP growth met expectations, boosting the yuan slightly. The Chinese yuan (USDCNY) fell 0.1%, having touched a near two-month high earlier in the week. The Chinese economy grew by 4.6% year-on-year, aligning with forecasts, though quarter-on-quarter growth missed expectations. Year-to-date GDP still lags behind the government’s 5% annual target, highlighting the need for further stimulus measures.
While Beijing has introduced multiple fiscal and monetary stimulus packages recently, the lack of concrete details has left investors cautious, dampening overall market optimism.
Japanese Yen Weakens Despite Government Intervention Warnings
The Japanese yen briefly weakened to levels not seen since late July, with the USDJPY pair touching 150.29 yen. However, verbal intervention from Japanese officials, including a warning from top currency diplomat Atsushi Mimura, helped the yen recover slightly. This intervention highlights the Japanese government’s stance against rapid one-sided movements in the currency markets.
Additionally, consumer price index (CPI) data showed inflation in Japan grew slightly higher than expected in September, though it has cooled from 10-month highs. Recent speculation over the Bank of Japan’s future interest rate hikes, paired with Japan’s Prime Minister Shigeru Ishiba’s statement on the economy’s inability to handle further rate hikes, continues to weigh on the yen.
Dollar Index Holds Near 2.5-Month High After Strong U.S. Data
The dollar index and dollar index futures both fell 0.1% in Asian trade, following a rally to over 2.5-month highs on Thursday. This surge came after stronger-than-expected U.S. retail sales data, which, along with signs of a resilient labor market, has traders maintaining bets on a 25 basis point interest rate cut by the Federal Reserve in November.
Other Asian Currencies Remain Stable
Broader Asian currencies saw limited movement. The Australian dollar (AUDUSD) gained 0.1%, recouping some of its recent losses. The South Korean won (USDKRW) rose 0.2%, while the Singapore dollar (USDSGD) remained flat. Meanwhile, the Indian rupee (USDINR) hovered near record highs hit earlier this month.
