Asian Forex: Yen strengthens on intervention rumors, AUD supported by Reserve Bank of Australia

Investing.com - On Thursday, most Asian currencies gained strength, with the yen continuing its recent rally amid ongoing warnings from officials about potential intervention in the foreign exchange market.

The Australian dollar rose to a three-year high following comments from the Reserve Bank of Australia, fueling market expectations of further rate hikes in the coming months.

Asian currencies generally strengthened, while the dollar received brief support from stronger-than-expected non-farm payroll data. Despite the dollar’s rally in overnight trading, its gains stalled on Thursday.

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Yen rises to three-week high on intervention rumors

The yen fell 0.6% against the dollar to approximately 152.38 yen, reaching its lowest level in three weeks.

Following the landslide victory of Japanese Prime Minister Fumio Kishida last weekend, the yen continued to strengthen, mainly supported by market speculation that the government might intervene in the foreign exchange market.

Chief currency diplomat Jun Murasaki refused to comment on whether Tokyo has intervened in the yen in recent weeks on Thursday, reiterating that the government will closely monitor any excessive currency fluctuations.

Murasaki also said that Tokyo is maintaining close contact with U.S. authorities regarding any coordinated intervention.

His comments helped the yen strengthen further, while weak producer price index data from January had little impact on the currency.

Australian dollar hits three-year high on RBA rate hike comments

The Australian dollar rose 0.1% against the dollar to its strongest level since early January, extending gains made earlier this week.

The currency was mainly driven by market expectations that the Reserve Bank of Australia will raise interest rates further after a 25 basis point hike last week. The central bank is trying to curb stubborn inflation.

RBA Governor Michele Bullock told lawmakers on Thursday that if inflation becomes “deeply entrenched,” the bank will hike rates again, though she noted it’s still unclear whether further rate increases are necessary to bring inflation down.

Bullock essentially reaffirmed the RBA’s data-driven stance on adjusting interest rates. However, markets expect the next rate hike could come as early as May.

Asian currencies rise, dollar gains limited support from non-farm data

Most Asian currencies gained on Thursday, as the dollar received only brief support from strong non-farm payroll data.

The dollar index and dollar index futures traded almost unchanged during Asian hours, essentially pausing after the overnight rebound. The dollar remains down about 0.8% for the week.

Market focus is now entirely on the upcoming U.S. consumer price index inflation data, which will be released on Friday, providing more clues about the world’s largest economy. Earlier on Thursday evening, weekly initial jobless claims data will be released.

“Structural resistance—uncertainty over Federal Reserve succession and broader U.S. policy risks—means the dollar still needs an additional upside surprise in upcoming data to sustain any rebound,” said analysts at OCBC Bank in a report.

Among Asian currencies, the Chinese yuan fell 0.15% against the dollar to its lowest level since May 2023. The yuan remained optimistic after a series of strong fixing rates set by the People’s Bank of China.

The Korean won declined 0.2% against the dollar, while the Indian rupee fell 0.3%, still close to 90.5 rupees.

The Singapore dollar was flat against the dollar, while the Taiwan dollar rose 0.1%.

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