Anna 
Asian currencies showed limited movement on Friday as the dollar steadied following overnight declines, with attention now shifting towards upcoming U.S. inflation figures expected next week, which are anticipated to provide further insights into interest rate trends.
The Chinese yuan declined alongside currencies linked to Chinese trade, reacting to reports suggesting that the U.S. government is preparing additional tariffs on Beijing. Concerns over potential retaliatory actions from China weighed on sentiment, impacting regional currencies.
Despite the dollar’s overnight retreat, regional currencies faced pressure as the greenback stabilized in Asian trading, driven by uncertainty surrounding the forthcoming U.S. inflation data.
Chinese Yuan Weakened by Tariff Reports
The Chinese yuan weakened, reflected by a 0.1% increase in the USDCNY pair, as multiple reports indicated that U.S. President Joe Biden was contemplating imposing fresh sanctions on specific Chinese industries like electric vehicles and batteries. The potential economic consequences of these tariffs remain uncertain, with possible retaliatory measures from China adding to tensions between the world’s largest economies.
Other currencies tied to Chinese trade followed suit, with the Australian dollar (AUDUSD) declining by 0.2%, alongside the Singapore dollar (USDSGD) and the South Korean won (USDKRW) losing 0.1% and 0.3%, respectively.
Japanese Yen Remains Fragile; USDJPY Approaches 156
The Japanese yen continued to exhibit weakness this week, with the USDJPY pair recovering a substantial portion of its losses incurred after perceived government intervention in currency markets last week. The USDJPY pair rose by 0.2% to 155.73 yen, significantly above its May lows of 152. Traders are now eyeing the 160 yen level as a potential threshold for Japanese government intervention.
Earlier data on household spending for March, released on Friday, demonstrated resilience, which could potentially support Japanese inflation expectations.
Dollar Steadies Ahead of U.S. Inflation Data
The dollar index and dollar index futures posted modest gains in Asian trade, rebounding from overnight losses. However, the greenback remained up by approximately 0.2% for the week.
Thursday’s decline in the dollar followed data indicating a larger-than-expected increase in weekly jobless claims, reinforcing expectations of a cooling U.S. labor market and potentially prompting Fed interest rate cuts by September.
Despite these expectations, concerns over persistent inflation remained pivotal for the Fed, with several officials underscoring this point during the week. The upcoming consumer price index data, scheduled for release next week, will be closely monitored for further insights into interest rate trajectories.
