Asia FX muted, dollar steadies with nonfarm payrolls on tap By Investing.com

Investing.com– Most Asian currencies moved in a tight range on Friday as growing risk-aversion in global financial markets sparked some safe haven flows into the dollar, while markets awaited key nonfarm payrolls data for more cues. 

The Japanese yen, however, remained steady after a hawkish Bank of Japan sparked a rally in the currency this week, putting it at its strongest levels since late-March. The currency also saw some safe haven bids as a global carry trade continued to come undone.

While global stock markets logged steep losses on concerns over slowing economic growth, losses in foreign exchange markets were limited by the prospect of U.S. interest rate cuts in the coming months. This notion also limited any strength in the dollar. 

Yen steady, USDJPY tests 148 on hawkish BOJ 

The Japanese yen steadied after a strong rally on Friday, with the pair hovering around 149.50 yen. The pair had fallen as low as 148.88 yen earlier in the day. 

The yen surged this week after the BOJ and flagged more potential hikes in 2024, citing some improving trends in the Japanese economy. 

Data on Friday showed Japan’s – the change in the total amount of yen in circulation- increased more than expected in July, heralding an uptick in inflation over the coming months. 

The BOJ said that inflation was likely to pick up on higher domestic wages- which presents a more hawkish outlook for the central bank this year. 

Dollar recovers some losses, nonfarm payrolls on tap

The and steadied in Asian trade after rebounding in overnight trade, as the greenback benefited from safe haven demand. 

The dollar was nursing some losses from earlier in the week after the Federal Reserve flagged the possibility of an interest rate cut in September. 

Weak economic data furthered bets on a September rate cut, as data showed an outsized contraction in manufacturing activity in June.

Focus was now squarely on upcoming data for more cues on the economy, with any more signs of a cooling labor market likely to further expectations for a rate cut. 

Broader Asian currencies moved in a tight range. The Chinese yuan’s pair steadied after logging wild swings this week, although sentiment towards China remained negative as weak PMI data fueled increased concerns over an economic slowdown.

The Australian dollar’s pair rose slightly before a , with soft consumer price index data spurring bets that the central bank will keep interest rates unchanged until at least next year. 

But data for the second quarter read slightly higher.

The South Korean won’s pair rose 0.2% despite a slightly stronger-than-expected for July, while the Singapore dollar’s pair was flat.

The Indian rupee’s pair moved little and remained in sight of record highs.