Investing.com– Most Asian currencies fell on Friday as concerns about further U.S.-China trade tensions weighed on sentiment. The dollar benefited from demand for safe-haven assets despite continued bets on interest rate cuts.

And they clawed back the measure of recent losses, rising 0.1% in Asian trading and approaching their first weekly gain in three. Gains on Thursday and Friday also lifted the dollar off nearly four-month lows as markets held on to bets that the Federal Reserve will start cutting interest rates in September.

While that idea has boosted Asian currencies in recent sessions, they retreated on Friday on concerns about worsening U.S.-China relations. Uncertainty over the U.S. presidential race, amid growing calls for President Joe Biden to drop out of his re-election bid, also curbed risk appetite.

China’s yuan nears 8-month low amid trade worries and growth concerns

The Chinese yuan weakened on Friday, with the currency pair approaching levels last seen in November 2023.

The yuan fell on recent reports that the U.S. is considering tougher trade sanctions on China’s technology sector and chipmaking, a move that could prompt retaliatory action from Beijing.

But the currency had already been hit by data showing China’s economy grew slower than expected in the second quarter.

That put the Third Plenum of the Chinese Communist Party in the spotlight. While top Chinese officials promised more measures to support growth, they did not provide any specific details about the measures.

Japanese yen weakens on suspicion of intervention

The Japanese yen weakened on Friday, reversing a pointed rise against the dollar earlier this week.

The pair rose above 157 yen, after falling to around 155 earlier this week. The yen’s surge has sparked speculation that the Japanese government was intervening in currency markets, although officials have given little guidance on the matter.

Japanese inflation came in lower than expected in June, raising uncertainty over whether the Bank of Japan will have enough leeway to raise interest rates at its meeting later this month.

Some analysts expect the Bank of Japan to raise interest rates by 10 basis points.

Broad Asian currencies weakened as risk appetite remained tender. The South Korean won rose 0.2%, while the Singapore dollar rose 0.1%.

The Australian dollar fell slightly, while the Indian rupee hit a record high above Rs 83.7.

India’s persistent trade deficit has weighed heavily on the rupee, providing little support to the currency despite continued optimism about the Indian economy.