Before labor data, Asia FX falls, and the yen falls as the BOJ stands pat.

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The Japanese yen fell after the Bank of Japan maintained its ultra-dovish stance, while the majority of Asian currencies fell on Friday as markets turned cautious ahead of key U.S. labor market data due later in the day.

After the BOJ held interest rates at record lows and offered no changes to its ultra-dovish policy ahead of a change in leadership at the bank, the yen fell 0.4%, remaining close to its lowest levels for the year.

The meeting on Friday was Governor Haruhiko Kuroda’s last, and economist Kazuo Ueda is expected to take over next month. Ueda has also indicated that monetary policy will remain accommodative in the near future, despite predictions from analysts that it will change by the end of 2023.

In line with the BOJ’s prediction that inflation will ease soon, separate data showed that producer price inflation in Japan eased for a second month in a row. However, the dovish stance of the central bank is likely to keep the yen low in the short term.

As worries about further increases in U.S. interest rates shook markets this week, broader Asian currencies lost ground, with the majority of units facing steep weekly losses. For additional clues regarding U.S. monetary policy, the February nonfarm payrolls data, which are due later in the day, are the primary focus.

The Singapore dollar, South Korean won, and Taiwan dollar all experienced losses of approximately 0.2 percent.

The Federal Reserve has more leeway to raise interest rates if there are any indications of job market resilience. This, in addition to inflation that is higher than anticipated, is likely to push interest rates higher than market expectations, according to a warning from Fed Chair Jerome Powell this week.

However, amid some hopes that the labor market was cooling, higher-than-expected weekly jobless claims saw the dollar retreat against a basket of currencies overnight.

On Friday, both the dollar index and its futures were unchanged, hovering just below their highest levels in three months.

Following a series of subpar economic readings from the nation, the Chinese yuan was expected to lose 0.9% this week, despite being flat on Friday. Even though China eased most anti-COVID measures earlier this year, data on trade and inflation that were lower than expected suggested a possible sluggish economic recovery.

Given China’s significance as a trading partner for the majority of the region, worries about a sluggish recovery also weighed on other Asian currencies.

About the author

Nafees Saifi // entrepreneur, author, trainer, and stocks and FX trader. 
Nafees Saifi is a professional FX trader from, India. Nafees has extensive experience trading commodities, bonds, and equity futures in the Asian, European, and US markets. Nafees holds a Bachelor of Finance and Economics degree and is focused heavily on Investment Finance and Quantitative Analysis.


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