Title: Asia-Pacific FX Market Review: Japanese Yen Dips Further in Asia Trading
Source: “Asia-Pacific FX News Wrap: Yen Weakened in Asia,” originally published on InvestingLive. Credit to InvestingLive and the article’s original author.
The Asia-Pacific foreign exchange markets saw notable movements on the morning of August 25, with the Japanese yen (JPY) continuing to weaken against major currencies. Thin trading ahead of the widely anticipated Jackson Hole Symposium contributed to relatively low volatility, although key fundamentals still played a role in driving currency movements. Here’s an in-depth look into this morning’s FX landscape across Asia-Pacific currencies.
Japanese Yen Under Pressure
The Japanese yen faced further weakness during Asian trading hours, extending recent losses ahead of U.S. Federal Reserve Chair Jerome Powell’s speech at Jackson Hole. The decline is reflective of ongoing divergence in monetary policy expectations between the U.S. Federal Reserve and the Bank of Japan (BOJ).
Key points driving yen weakness:
– USD/JPY climbed back above 146.00 during the session.
– The move was supported by consistently high U.S. Treasury yields, particularly the 10-year note, which continues to hover near multi-year highs.
– Japanese economic data have failed to shift risk sentiment, as inflation remains relatively under the BOJ’s 2% target.
– Little expectation exists for an immediate tightening of Japan’s ultra-loose monetary policy, despite hints at yield curve control (YCC) flexibility.
Market caution continues to surround any potential BOJ intervention as the yen moves closer toward levels that previously sparked action from Japanese authorities, most notably in the latter half of 2022. However, analysts argue that any future intervention might require a breach beyond the 150.00 threshold, or a severe pace of decline rather than a slow drift in USD/JPY over time.
Australian Dollar Mixed Post-Capital Expenditure Data
The Australian dollar (AUD) showed limited reaction to fresh capital expenditure (capex) data for Q2, which came in mixed relative to forecasts. While stronger investment in equipment was noted, shortfalls in structures dragged on the overall investment numbers.
Capex report details:
– Q2 capital expenditure rose 2.8% quarter-on-quarter (QoQ), above the expected 2.0% increase.
– However, softer expectations for the upcoming quarter tempered market enthusiasm.
– Investment in equipment, plant, and machinery showed resilience, a positive sign for corporate health.
– Outlook for public and infrastructure investment remained steady but cautious in light of broader macro uncertainty.
AUD/USD traded modestly higher but lacked significant momentum, constrained by overall risk-off sentiment in global markets. Traders refrained from making big moves ahead of Powell’s Jackson Hole remarks, given the potential for hints at further U.S. tightening.
Chinese Yuan Remains Soft Despite PBOC Efforts
The Chinese yuan (CNY) remained under pressure during Asian trade, even after the People’s Bank of China (PBOC) took further steps to stabilize the currency. Recent rate cuts and strong daily reference rate settings (fixings) have not sufficiently bolstered market sentiment.
PBOC measures and yuan performance:
– The central bank continued setting the daily USD/CNY midpoint at levels much stronger than market models predict.
– This daily fixing strategy, known as counter-cyclical adjustment, aims to guide market expectations and restrict rapid currency depreciation.
– Despite these efforts, the offshore yuan (CNH) continues to weaken, reflecting market skepticism about the PBOC’s ability to support the currency amid economic slowing.
Contributing to the yuan’s weakness are recurring concerns over:
– China’s troubled real estate sector; Country Garden and Evergrande remain risk flashpoints.
– Weak retail data and underwhelming industrial output reports raising fears of deflation.
– Softening export figures, a key pillar of the Chinese economy.
– Ongoing geopolitical tensions with the West, particularly concerning tech sanctions and trade restrictions.
Market participants continue to brace for more targeted fiscal
Explore this further here: USD/JPY trading.