Asian Currencies Steady as Fed Rate Cut Expectations Weaken; Yen Strengthens on Robust Q2 GDP

• Asian currencies stable as July PPI rises, Fed rate cut odds ease slightly.

• Yen rises 0.5% after strong Q2 GDP; regional currencies show minor moves.

Most Asian currencies remained relatively stable on Friday following stronger-than-anticipated U.S. producer inflation figures, which diminished expectations for aggressive Federal Reserve rate cuts. The U.S. producer price index (PPI) for July came in hotter than forecast, reducing the likelihood of a larger 50 basis point cut next month. While markets still anticipate a 25 basis point Fed rate reduction in September, confidence in this move softened slightly after the PPI release.

The U.S. Dollar Index, which tracks the dollar against major currencies, pulled back by 0.2% during Asian trading hours after a strong prior session. Investors also closely examined key Chinese data, including July industrial production and retail sales, both of which underperformed expectations amid weakening external demand and subdued consumer spending.

The Japanese yen appreciated against the U.S. dollar, with the USD/JPY pair dropping 0.5% following robust second-quarter GDP results released Friday. Japan’s economy expanded more than anticipated, supported by resilient exports and capital expenditures despite ongoing U.S. tariff challenges. This stronger economic performance has strengthened speculation that the Bank of Japan may move toward policy tightening.

Meanwhile, the yuan remained relatively flat in both onshore USD/CNY and offshore USD/CNH markets.

Regional currencies showed minimal shifts: the Singapore dollar edged slightly lower against the dollar by 0.1%, the Indian rupee remained unchanged, the Australian dollar gained 0.2%, and the South Korean won rose 0.1% versus the dollar.