Anna 
Most Asian currencies experienced weakening on Friday, while the dollar stabilized in anticipation of crucial inflation data that could influence the Federal Reserve’s approach to interest rate adjustments.
Following a decline in the dollar overnight due to weaker-than-expected U.S. gross domestic product (GDP) figures, Asian currencies received some respite. However, persistent speculations about prolonged higher U.S. interest rates offset this relief, causing the dollar to regain ground during Asian trading.
The Japanese yen notably underperformed, with the USD/JPY pair surpassing 156 to achieve new 34-year highs. Doubts emerged after comments from the Bank of Japan (BOJ) suggested limited capacity for further interest rate hikes despite forecasting higher inflation in the future. The BOJ’s projection of weaker economic growth cast doubts on its ability to sustain rate increases, leading to a generally dovish outlook for the yen.
Meanwhile, broader Asian currencies weakened amid ongoing concerns about prolonged higher U.S. interest rates. The Chinese yuan’s USD/CNY pair slightly rose, remaining near recent five-month highs. South Korea’s USD/KRW pair increased by 0.4%, while the Singapore dollar’s USD/SGD pair added 0.1%.
The Australian dollar’s strength was supported by robust producer price index (PPI) inflation data, coupled with a higher consumer price index (CPI) reading earlier in the week, fueling expectations of sustained higher rates in Australia.
As the U.S. dollar stabilized, the focus shifted to the upcoming personal consumption expenditures (PCE) price index data, which is the Federal Reserve’s preferred inflation metric. Despite the subdued GDP growth in the U.S. economy during the first quarter, persistently high inflation rates prompted traders to adjust expectations for near-term rate cuts by the Fed. The CME Fedwatch tool indicates that traders are now anticipating rate cuts no earlier than September or the fourth quarter of the year.
