Asian Currencies Mixed as Dollar Strength Persists Yen Weakens Near 158
Asian currencies showed mixed movements on Wednesday as the U.S. dollar maintained its recent gains. The Japanese yen weakened further, approaching 158 per dollar, as markets assessed the Bank of Japan's policy outlook and growing fiscal concerns. Higher oil prices and rising Treasury yields added pressure on currencies, while investors awaited the Federal Reserve's September meeting minutes and speeches from Fed officials for insights on future rate moves.
The dollar index hovered around 102.03, up 0.2%, while the USD/JPY pair rose 0.2% to 158.38. The euro and British pound both slipped 0.2% against the dollar. The Australian and New Zealand dollars were trading at $0.6973 and $0.5610, respectively. Oil prices climbed as much as 1% to $101.50 per barrel after Iran increased attacks on tankers in the Strait of Hormuz, driving Treasury yields up three basis points to 5.31%.
The dollar faced some pressure after softer U.S. inflation and jobs data reduced expectations for an October rate hike, though markets still anticipate tightening later this year and in 2027. The probability of an October rate increase dropped to 20.5% from 51% a week earlier, but a December hike remains highly likely at 84.5%. Fed officials Christopher Waller, Neel Kashkari, and Alberto Musalem were scheduled to speak, following Kansas City Fed President Jeff Schmid's remarks that further rate hikes are necessary to curb inflation.
The yen's weakness persisted as new BOJ board member Ayano Sato expressed support for raising interest rates in stages. Reports suggested the BOJ may signal that underlying inflation has reached its 2% target, indicating potential rate hikes. The yen could remain under pressure due to Japan's consideration of a second supplementary budget, which may disappoint markets. Meanwhile, the Indian rupee faced pressure from rising oil prices and U.S. yields, ahead of the Reserve Bank of India's expected 25 basis point rate hike to 5.50%.
Across the region, the USD/CNH pair rose slightly, while the USD/KRW pair dipped marginally. The euro came under pressure from concerns over European fiscal positions, particularly France's deficit and Spain's snap-election worries.