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Most Asian currencies stayed within a narrow range on Thursday, while the dollar stabilized amid uncertainty about U.S. interest rates before important economic data in the coming days.

Japanese Yen Weakens Ahead of BOJ Meeting

The Japanese yen continued to weaken, reaching new 34-year highs against the USDJPY pair ahead of the Bank of Japan meeting on Friday. The currency pair surpassed a level that traders had expected would prompt intervention from the Japanese government.

USDJPY Surpasses Intervention Level; Awaits BOJ Meeting The USDJPY pair surged above the 155 level in overnight trading, settling around 155.44 in Asian trading.

Traders had expected 155 to trigger intervention by the Japanese government in the currency market. However, officials only issued verbal warnings, and the sustained gains in USDJPY suggested little action had been taken.

Uncertainty Surrounds BOJ’s Policy Outlook

The yen’s weakness drew attention to the upcoming BOJ meeting.

The central bank is expected to keep interest rates unchanged on Friday, following a historic rate hike in March.

But with recent yen weakness and expectations of higher wages and inflation, traders are cautious about any hawkish signals from the BOJ.

The BOJ may increase its inflation outlook and confirm plans to raise interest rates further this year, which could potentially strengthen the yen.

However, the extent of the yen’s recovery remains uncertain, as concerns about higher U.S. interest rates persist.

Dollar Steadies with More Rate Signals Ahead

The dollar index and dollar index futures stabilized in Asian trading after a slight recovery overnight.

The greenback remained close to over five-month highs reached last week, as traders reduced expectations of early interest rate cuts by the Federal Reserve.

Analysts expect this week’s economic data to offer more signals about interest rates. Later on Thursday, the first-quarter U.S. GDP data will be due, showing the resilience of the U.S. economy at the start of 2024.

More anticipated is the PCE price index data, the Fed’s preferred inflation gauge, due on Friday.

Anticipation of the data kept most Asian currencies under pressure. The South Korean won’s USDKRW pair barely moved despite GDP data showing stronger-than-expected growth in the first quarter.

The Singapore dollar’s USDSGD pair dropped 0.1%, while the Chinese yuan’s USDCNY pair remained stable amid strong fixes by the People’s Bank.

The Indian rupee’s USDINR pair stayed below record highs reached earlier in April, with traders cautious ahead of India’s 2024 general elections beginning this week.

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