Investing.com — The U.S. dollar edged lower on Wednesday but remained near a two-month high, while Asian currencies were mixed and the Japanese yen extended its rebound ahead of key U.S. inflation and labor-market data.
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The dollar’s recent strength has been supported by higher U.S. yields and expectations for further Federal Reserve tightening, although more cautious comments from a senior Fed official have trimmed some rate-hike bets.
The U.S. dollar index was around 101.22, down 0.2%, while the USD/JPY pair fell 0.3% to 156.77, extending the yen’s rebound from its recent slide. The EUR/USD pair rose marginally to 1.1354, while GBP/USD gained 0.4% to 1.3278.
The dollar is still heading for its strongest monthly performance since June after the Fed’s renewed focus on containing inflation pushed U.S. rate expectations and Treasury yields higher. The dollar has risen about 2% against the yen this month and nearly 3.8% in the third quarter.
Yen rebounds as intervention risks, Japan data support currency
The yen’s latest gains made it the best-performing Group-of-10 currency on Wednesday, after Japanese officials stepped up warnings over excessive depreciation.
Japan’s top currency official Atsushi Mimura told Reuters Prime Minister Sanae Takaichi and Finance Minister Satsuki Katayama, together with the U.S., had sent a clear warning about yen weakness.
Weaker-than-expected August retail sales and an unexpected drop in industrial output could temper bets on faster BOJ tightening, although yen intervention risks remain a key support for the currency.
The BOJ’s July meeting minutes also showed policymakers believed underlying inflation was approaching the 2% target and that continued rate increases were appropriate while financial conditions remained accommodative.
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Aussie falls below $0.70 after inflation data
The AUD/USD pair fell 0.3% to $0.69, taking the Australian dollar below $0.70 for the first time since early August and to a nine-week low of $0.69.
Australia’s August inflation reading slightly undershot forecasts, weighing on the Australian dollar as it tempered expectations for another near-term RBA hike, even though annual and underlying inflation remained well above target.
The data came a day after the Reserve Bank of Australia raised its cash rate by 25 basis points to 4.60%, its highest level since 2011, while warning that inflation risks were materializing and that further tightening remained possible.
The Australian dollar’s decline despite the RBA hike reflects how much of the tightening was already priced into the currency. Renewed expectations for Fed hikes, elevated U.S. Treasury yields and broader risk aversion have also reduced the benefit of Australia’s higher rates.
Dollar, yuan focus on U.S. data and China PMI
The Fed’s preferred core PCE inflation measure is due later on Wednesday, while Friday’s nonfarm payrolls report remains the bigger near-term test for the dollar and rate expectations.
New York Fed President John Williams said there was “no need for urgency” on another rate increase, knocking expectations for an October hike down to about 50% from 71% previously.
The Chinese yuan was broadly steady. China reported on Wednesday that its official manufacturing PMI rose to 50.1 in September from 49.8, returning to expansion, while the non-manufacturing PMI improved to 50.2.
The yuan is heading for its seventh consecutive quarterly gain against the dollar before China’s Oct. 1-7 National Day holidays.
China, meanwhile, warned of a “resolute response” to potential EU trade restrictions, calling them protectionist and threatening possible probes into Chinese companies and supply chains.
Elsewhere, the USD/KRW pair rose 0.30% to 1,355.69, USD/INR pair rose 0.05% to 96.138, USD/SGD gained 0.02% to 1.2779, and the New Zealand dollar fell 0.12% to $0.5643.
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Original Article
Asian currencies mixed as dollar eases from two-month high, yen gains
U.S. 10-year yields anchor near 2007 peaks, set for biggest monthly jump in 2 yrs
Dollar firms, Aussie drops after RBA hike, and sterling slips on Burnham speech
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