Asian Currencies Mixed as Fed Cut Bets Ease; Yen Strengthens on Strong Q2 GDP
Most Asian currencies traded in a narrow range on Friday after hotter-than-expected U.S. producer price inflation (PPI) data reduced expectations for aggressive Federal Reserve rate cuts. The Japanese yen bucked the trend, climbing after robust second-quarter GDP figures strengthened bets on a Bank of Japan rate hike.
Investors also digested Chinese economic data, including July industrial production and retail sales.
Hot U.S. PPI Tempers Fed Cut Expectations
The U.S. Dollar Index, which tracks the greenback against major currencies, slipped 0.2% in Asian trading after sharp gains in the prior session. July’s PPI data came in hotter than forecast, reducing the likelihood of a larger-than-expected 50 basis point cut by the Fed in September.
Markets still expect a 25 basis point rate cut next month, but the probability has slipped from near certainty. Expectations for a half-point cut have largely faded.
Yen Gains on Japan’s Strong Q2 GDP
While most Asian currencies remained subdued, the Japanese yen strengthened. The USD/JPY pair fell 0.5% after data showed Japan’s economy grew faster than expected in Q2, supported by strong exports and capital spending despite U.S. tariff pressures. The results bolstered speculation that the Bank of Japan could tighten policy further.
China Data Disappoints
The onshore USD/CNY and offshore USD/CNH traded flat after data revealed July industrial production growth fell short of expectations. Overseas demand weakened as earlier shipments were front-loaded ahead of U.S. tariffs. Retail sales also missed forecasts, highlighting continued weakness in Chinese consumer spending.
Other Asian Currencies
- Singapore dollar (USD/SGD): down 0.1%
- Indian rupee (USD/INR): flat
- Australian dollar (AUD/USD): up 0.2%
- South Korean won (USD/KRW): up 0.1%
