Asia FX weak, dollar at over 2-week high before more rate, inflation cues

Investing.com-- Most Asian currencies weakened on Thursday, while the dollar crested over two-week peaks amid caution ahead of more key cues on U.S. inflation and interest rates in the coming days. 

Regional currencies were still reeling from a string of hawkish signals from the Federal Reserve, as officials warned that they needed much more confidence that inflation was easing. Some officials also flagged the possibility of more rate hikes, if inflation remained sticky.

Dollar upbeat as GDP, inflation figures loom 

The dollar index and dollar index futures rose slightly in Asian trade, extending strong overnight gains and reaching their highest levels since mid-May. 

Traders remained largely biased towards the greenback amid increasing conviction that the Fed will not cut interest rates any time soon.

A revised reading on first quarter gross domestic product is due later on Thursday, and is expected to show continued resilience in the U.S. economy. Strength in the economy gives the Fed more headroom to keep rates high for longer.

But the main point of focus this week is PCE price index data, the Fed’s preferred inflation gauge. Due on Friday, the reading is widely expected to show inflation remaining sticky through April.

Several Fed officials are also set to speak in the coming days. 

Japanese yen flounders, inflation data awaited 

The Japanese yen’s USDJPY pair fell slightly on Thursday, but remained close to recent highs, amid sustained weakness in the yen.

But further weakness in the yen was stymied by the possibility of more government intervention, after the government was seen intervening in currency markets at the beginning of May. USDJPY reaching 160 had triggered the last bout of intervention. 

Focus was now squarely on an upcoming inflation reading from Tokyo, due on Friday, for more cues on the Japanese economy. Any signs of increasing inflation could bring some relief to the yen. 

Broader Asian currencies remained weak. The Chinese yuan’s USDCNY pair weakened slightly after the People’s Bank of China allowed the currency to weaken to six-month lows this week, amid mounting pressure from concerns over a sluggish Chinese economy. 

Purchasing managers index data from China is due on Friday. 

The Australian dollar’s AUDUSD pair traded sideways, taking little support from a stronger-than-expected inflation reading on Wednesday.

The Singapore dollar’s USDSGD pair rose 0.1%, while the South Korean won’s USDKRW pair surged 0.5%.

The Indian rupee’s USDINR pair rose slightly and remained close to recent record highs.