Japanese Yen Dips After Record Trade Deficit, Asia FX Weakens By Investing.com

By Ambar Warrick 

Investing.com– The Japanese yen was among the worst-performing Asian currencies on Thursday after the country logged a record trade deficit for August, while fears of more hawkish measures by the Federal Reserve weighed on most regional units.

The fell 0.2% to 143.43 to the dollar, hovering just above a 24-year low hit earlier this month. Rising energy imports by Japan saw the country log a record-high of 2.82 trillion yen ($1.97 billion) in August.

The yen is among the worst-performing Asian currencies this year, hit chiefly by the growing gap between U.S. and Japanese interest rates. The Bank of Japan has signaled no intent to raise rates this year, given that the Japanese economy is still reeling from the effects of the COVID-19 pandemic.

Broader Asian currencies also retreated, while the dollar stuck to near 20-year highs after data showed U.S. mirrored strength seen earlier in the .

The and both rose 0.1%. With U.S. inflation remaining stubbornly high in August, the Fed now has more impetus to keep raising rates sharply. 

Markets are now pricing in the possibility that the Fed will hike rates by as much as next week, although a majority of traders expect a 75 basis point hike. 

weakened 0.1% but traded near a two-year low hit last month. The People’s Bank of China (PBoC) on Thursday , as a hawkish outlook for U.S. interest rates limited the bank’s maneuvering space. 

The Chinese government is struggling to shore up economic growth after a series of COVID lockdowns ground activity to a halt this year. 

The yuan now faces the risk of falling below the psychologically important 7 to the dollar mark for the first time in over two years. 

Headwinds from a stronger dollar have battered most Asian currencies this year. The was trading at its weakest level in 13 years. 

In the Asia-Pacific region, the traded flat after data showed the rebounded more than expected in the second quarter, thanks to loosening COVID restrictions.

rose 0.2% after data showed continued strength in the country’s , although unemployment also rose slightly.