Investing.com– Most Asian currencies traded in narrow ranges on Friday, while the dollar held near two-month highs ahead of key inflation data that is likely to factor in the Federal Reserve’s outlook for interest rates.

The strength of the dollar caused the Japanese yen to weaken further from previous levels, which investors initially expected would attract government intervention. Mixed inflation data from the Japanese capital failed to provide support for the currency, as did repeated warnings from the government.

Weak sentiment towards China, ahead of data on key purchasing managers due for release over the weekend, also restricted flows into regional markets. The yuan was at its weakest level since October, with little sign that selling pressure on the currency was easing.

Japanese Yen Continues to Weaken, USDJPY Above 161

The weakening of the Japanese yen continued, and on Friday the pair increased by 0.2% and briefly exceeded the level of 161.

The pair was now well above the levels that attracted government intervention in May. While officials continued their verbal warnings, movement in the USDJPY pair suggested that no actual intervention had occurred so far.

also showed a petite escalate in inflation. While headline inflation rose, core inflation remained well below the Bank of Japan’s annual target of 2%.

Weak inflation data has fueled doubts about how much leeway the Bank of Japan has in tightening monetary policy, a key factor behind the yen’s recent weakening.

Dollar at 2-month high, PCE data expected

In Asian trade, the index rose 0.2% to its highest level since slow April.

Ahead of the release of the key data, which is the Fed’s preferred inflation gauge, investors were still bullish on the US dollar.

The reading is expected to be released on Friday and is expected to show a slight reduction in inflation in May, although still well above the Federal Reserve’s annual target of 2%.

The dollar has not been deterred by recent data showing some cooling in the US economy, especially in the labour market. Uncertainty about when and by how much the Fed will cut interest rates has kept flows into the dollar high.

As a result of this uncertainty, broader Asian currencies experienced immense declines in June.

The Chinese yuan pair was little changed on Friday and remained at its highest level since November. Attention now turns to a key , which is expected to come over the weekend.

The Australian dollar fell 0.3%, giving up some of the gains made on stronger-than-expected inflation data this week.

The South Korean won pair fell 0.2% after some stronger-than-expected data.

The Singapore dollar pair rose 0.1%. The Indian rupee pair did not move much but remained near recent record highs.