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Asia FX muted ahead of US inflation data; USDJPY nears 152

Traders remained largely wary of making big bets in anticipation of more cues on U.S. interest rates. Asian markets were also still reeling from a bumper nonfarm payrolls reading on Friday, which saw traders further price out expectations of early interest rate cuts by the Federal Reserve. 

The payrolls data kept the dollar trading strong, and also pushed up U.S. Treasury yields, which in turn weighed on Asian currencies.

The Japanese yen weakened slightly on Tuesday, with the USDJPY pair now moving back towards the 152 level- its highest since 1990.

Weakness in the yen came even as Japanese officials repeatedly warned that they will respond appropriately to speculation against the yen. But the odds appeared stacked against the yen, especially in the face of higher-for-longer U.S. interest rates, which have been a key weight on the Japanese currency for nearly two years.

The yen also took little support from the Bank of Japan’s first rate hike in 17 years, given that the central bank offered largely dovish signals on future policy decisions. 

The dollar index and dollar index futures moved little in Asian trade after clocking some overnight losses. But traders still remained largely biased towards the greenback ahead of more signals on U.S. interest rates this week.

Consumer price index inflation data for March is due on Wednesday and is widely expected to show inflation remaining comfortably above the Fed’s 2% annual target, giving the central bank little impetus to begin trimming rates early.

The minutes of the Fed’s March meeting are also due on Wednesday, and come amid growing doubts over whether the central bank will begin cutting interest rates in June.

A slew of Fed officials warned that sticky inflation will keep the Fed from cutting rates early this year. 

This notion weighed on most Asian currencies, keeping them in a tight range on Tuesday. The Australian dollar’s AUDUSD pair fell slightly, as data showed consumer sentiment worsened in early-April.

The Chinese yuan’s USDCNY pair remained well above the 7.2 level, as the currency was hit with increased selling on growing doubts over a Chinese economic recovery.

The South Korean won weakened, with the USDKRW pair rising 0.1%, while the Singapore dollar’s USDSGD pair tread water.

The Indian rupee’s USDINR pair moved little and remained close to record highs above the 83 level. 


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