Investing.com – Most Asian currencies were slightly firmer on Tuesday, with the dollar’s recent gains cooling and the yen rising on speculation of government intervention and a rate hike by the Bank of Japan.
But sentiment in Asian markets remains fragile due to the prospect of a trade war between China and the West. While Chinese ministers meet with German officials over tariffs on electric vehicle imports, Canada is also considered likely to join the United States in imposing restrictions on Beijing.
Broader expectations for key inflation data from the U.S. and Japan also contributed to weaker sentiment.
USD/JPY retreats from around 160 as yen strengthens
The yen has gained this week, retreating from levels that prompted government intervention in May.
USD/JPY fell 0.2% to 159.36 after rising to 159.9 on Monday. Japanese officials have repeatedly warned that they will intervene if the yen moves “excessively”.
Minutes from the Bank of Japan’s June meeting also provided some support for the yen, as some officials were seen raising the possibility of a rate hike in July.
This week’s focus is on key, which expires on Friday. The data is expected to provide more clues on the path of inflation, a key consideration as the Bank of Japan tightens policy.
RMB fragile, USD/CNY hits 7-month high
The yuan weakened on Tuesday, with the pair surging to a seven-month high after the People’s Bank of China eased its fixing rate.
The prospect of a trade war with the West has done much to undermine confidence in China as Chinese officials raised the possibility in the face of high European import tariffs on electric vehicles.
Canada is also seen considering restrictions on Chinese electric vehicles, which could heighten concerns about a trade war.
Traders are now watching talks between Chinese and German officials over tariffs.
Dollar weakens, PCE inflation awaits
In Asian trading, the U.S. dollar and the U.S. dollar edged lower, extending overnight losses as they gave up some gains from last week’s strong rebound.
The focus this week is entirely on the upcoming data. The reading is the Fed’s preferred inflation gauge and could affect the bank’s interest rate outlook.
Worries about China and expectations for personal consumption spending data kept most Asian currencies trading broadly steady, although a weaker dollar helped them halt recent losses.
The Australian dollar rose 0.1% against the US dollar, with the market’s focus also on data released on Wednesday.
The Korean won was flat, as was the Singapore dollar.
The Indian rupee was flat but came off record highs last week.
