Asian currencies mixed as yen rebounds, dollar stays near two-month high

Asian currencies experienced a mixed day on Wednesday, with the Japanese yen strengthening after a two-day decline and the U.S. dollar hovering near a two-month peak as investors awaited key economic data from the United States. The yen benefited from renewed Japanese warnings about currency weakness and the impact of end-of-quarter flows, while the Australian dollar slipped below $0.70 after inflation data fell short of expectations.

The U.S. dollar index stood at around 101.42, while the USD/JPY pair dropped 0.3% to 156.91, marking the yen's strongest performance among the top ten Group of Nations currencies on the day. The greenback, buoyed by the Fed's renewed focus on curbing inflation, has gained roughly 2% against the yen this month and nearly 3.8% in the third quarter.

Japanese officials, led by Prime Minister Fumio Kishida and Finance Minister Yasuo Fukui, issued a strong warning against excessive yen depreciation, with Mimura stating that the currency weakness needed to be addressed. Meanwhile, Australia's inflation figures came in slightly below forecasts, contributing to the Australian dollar's decline below $0.70 and marking its lowest level since early August.

Despite the Reserve Bank of Australia's decision to raise interest rates by 25 basis points to 4.60% in an attempt to combat inflation, the move did little to boost the currency's value. The RBA's intervention came as the bank acknowledged that inflation risks were materializing and further hikes might be needed. With the Federal Reserve's preferred core PCE inflation measure due later in the day and the upcoming nonfarm payrolls report on Friday, the market remains closely watching for any signs of rate changes.