Investing.com– Most Asian currencies fell slightly on Friday as the dollar held on to most of its weekly gains on expectations for a slower pace of Federal Reserve interest rate cuts.

The Japanese yen held near its weakest level in three months as Japan prepared for a hotly contested general election this weekend, while verbal warnings about potential currency market intervention also kept traders skittish about the currency .

Most Asian currencies posted modest losses this week as a number of factors dampened risk aversion, although the traditionally safe-haven yen was the worst performer this week.

USDJPY Holds Near 152 Due to Elections, Intervention is in Focus

The yen pair held near monthly highs of around 152 yen and was headed for a 1.6% gain this week, its fourth consecutive week of gains.

Sentiment towards Japanese markets has deteriorated significantly ahead of Sunday’s general election, with local polls showing that an alliance led by the ruling Liberal Democratic Party may struggle to gain a majority.

That could leave Prime Minister Shigeru Ishiba facing an uphill battle to enact more economic reforms, with increased political uncertainty expected to undermine expectations of further interest rate increases from the Bank of Japan.

Consumer inflation data from Tokyo showed inflation fell slightly less than expected in October, but fell below the BoJ’s annual target of 2%. The data typically herald a similar reading from nationwide inflation data.

The yen gained strength after government officials maintained warnings about potential intervention in the foreign exchange market amid the recent weakening of the yen.

The dollar is ready for the fourth week of growth

Asian trade stabilized and headed for growth for the fourth week in a row. The dollar is up about 0.6% this week.

In addition to bets on smaller interest rate cuts, the dollar was also boosted by growing bets on Donald Trump winning the 2024 presidential election. Recent polls and online forecasts show that Trump has overtaken Democratic candidate Kamala Harris.

Trump’s policies are expected to be inflationary, creating a higher outlook for US interest rates in the longer term.

Concerns about tighter U.S. interest rates triggered weakness in Asian markets, with most regional currencies heading for weekly losses.

The Chinese yuan pair rose by 0.1% on Friday and was expected to rise by 0.3%. The meeting of the National People’s Congress, which was initially scheduled for behind schedule October, now appears to have been postponed to November.

The Australian dollar pair {AUDUSD} fell 0.3% on Friday, while the South Korean won pair rose 0.7%.

The Singapore dollar pair rose 0.2%, while the Indian rupee pair hovered near record highs.