Anna 
Most Asian currencies maintained stability on Thursday, while the dollar remained firm amidst uncertainty surrounding U.S. interest rates ahead of crucial economic indicators.
The Japanese yen experienced prolonged declines, with the USD/JPY pair hitting fresh 34-year highs just before the eagerly anticipated Bank of Japan meeting scheduled for Friday. This surge breached a level that traders had widely expected to prompt intervention from the Japanese government.
USD/JPY Surpasses Intervention Threshold, Focus Shifts to BOJ
The USD/JPY pair surged beyond the key 155 level during overnight trading and steadied around 155.44 during Asian trading hours. Market participants had anticipated the 155 level to trigger currency market intervention by Japanese authorities. However, despite continued verbal warnings, the lack of substantial action from officials indicated that little had been done to counter the sustained gains in USD/JPY.
The weakening yen has placed significant attention on the upcoming Bank of Japan meeting. While the central bank is expected to maintain interest rates unchanged following a historic rate hike in March, recent yen depreciation, alongside prospects of higher wages and persistent inflation, has heightened vigilance over any hawkish signals from the BOJ.
The BOJ may potentially revise its inflation outlook upwards and reiterate plans for further interest rate hikes this year, a move that could potentially bolster the yen. Nevertheless, the extent of yen recovery remains uncertain, as concerns regarding prolonged elevated U.S. interest rates continue to exert pressure.
Dollar Holds Steady Ahead of Key Economic Indicators
The dollar index and dollar index futures stabilized during Asian trading after a mild recovery in overnight sessions. The greenback, lingering near over five-month highs reached last week, reflects the gradual removal of expectations for early interest rate cuts by the Federal Reserve.
Market participants eagerly await this week’s economic data, which is expected to provide further insights into the trajectory of interest rates. Notably, the release of first-quarter U.S. gross domestic product data later on Thursday will shed light on the resilience of the U.S. economy in early 2024.
However, the focus remains on the Personal Consumption Expenditure (PCE) price index data, scheduled for release on Friday. Anticipation surrounding this data has kept most Asian currencies cautious. Despite robust first-quarter GDP growth in South Korea, reflected in little movement in the USD/KRW pair, currencies like the Singapore dollar and the Chinese yuan remained subdued.
In India, the USD/INR pair hovered below record highs observed earlier in April, with traders exercising caution ahead of the country’s general elections set to commence this week.
