Investing.com– Most Asian currencies rose on Thursday as rising expectations of a Federal Reserve interest rate cut dragged down the dollar and a feeble yen kept investors on alert for potential government intervention.

However, gains in Asian currencies were capped by hawkish signals from the Federal Reserve’s June meeting minutes, while expectations for key payroll data due on Friday also kept sentiment cautious.

Japanese yen gains but intervention concerns remain

The Japanese yen found some relief from dollar weakness, with the pair down 0.2% after nearly breaching the 162 level on Wednesday.

The pair was trading well above 160, a level that last attracted government intervention in May. As Japanese officials reiterated their commitment to defending the yen, traders remained alert for any potential intervention in the coming days.

Traders had speculated that the government would take advantage of low trading volumes during the U.S. market holiday on July 4 to intervene. The government’s intervention in May came during the Japanese market holiday.

Dollar sinks on feeble jobs data, interest rate cut bets rise

Both were down about 0.1% in Asian trading on Thursday, extending piercing declines overnight.

Weaker-than-expected data and a feeble purchasing managers’ index confirm growing bets that the U.S. economy is cooling, which investors believe will prompt the Fed to cut interest rates sooner.

Labor market data also boosted sentiment, predicting a feeble reading on Friday.

Traders increased bets that the Fed will deliver a 25 basis point cut in September. It showed that traders are pricing in a nearly 66% chance of a rate cut in September, up from 59% seen a day earlier.

Still, the Fed’s June meeting showed that policymakers were not convinced that inflation was falling to the point that rate cuts would be feasible. Some officials still saw a need for higher interest rates to bring down inflation.

Several Federal Reserve officials, including high-profile Chairman Jerome Powell, warned this week that while the bank has made some progress in fighting inflation, it still lacks the confidence to start cutting interest rates.

Still, most Asian currencies gained against a weaker dollar. The Australian dollar rose 0.2%, even as data showed the country’s trade balance shrank more than expected in May, on feeble exports.

The Chinese yuan was unchanged, remaining near seven-month highs on weakening confidence in the Chinese economy.

The South Korean won fell 0.4%, while the Singapore dollar fell 0.1%.

The Indian rupee has stabilised after approaching record highs this week.