Investing.com– Most Asian currencies weakened on Friday, with the Japanese yen rebounding slightly from a five-month low as sturdy inflation data only partially offset the Bank of Japan’s dovish outlook.

Regional currencies came under pressure from a broad hit to the dollar, which hit its highest level in more than a year after the Federal Reserve signaled a slower pace of interest rate cuts in 2025. The dollar remained well valued even as markets braced for a potential U.S. government shutdown .

Indices and rose slightly in Asian trade and hit their highest level since November 2023. Attention now turns to key data due later on Friday for more information on interest rates.

China’s yuan weakened to its lowest level in over a year after Beijing left its key lending rate unchanged.

Yen rises from 5-month low on sturdy CPI; BOJ’s outlook is dovish

The Japanese yen was one of the better performers on Friday, with the pair falling 0.2% on slightly stronger-than-expected inflation data for November.

However, on Thursday, the yen fell to its weakest level in five months and USDJPY rose to 157.93 yen, its highest level since delayed July.

While sturdy CPI data further strengthened the case for the Bank of Japan to ultimately raise interest rates, Governor Kazuo Ueda’s comments on Thursday suggested the raise would come later rather than earlier in 2025.

The central bank and signaled that inflation will continue to rise. However, Ueda’s comments on spring salary negotiations suggest a raise could come at least earlier than March.

The recent weakening of the yen has also sparked renewed speculation about government intervention after ministers issued verbal warnings on the yen’s weakness.

Chinese yuan lowest in a year; PBOC leaves prime lending rate unchanged

The Chinese yuan pair rose 0.2% to reach its highest level since November 2023.

The People’s Bank of China left its benchmark unchanged on Friday, in line with broad expectations, with the central bank deemed to have constrained ability to cut interest rates further amid continued weakening of the yuan.

Loose monetary policy also provided constrained support to China’s economy last year, with Beijing expected to raise fiscal spending in the coming year to boost economic growth.

Broader Asian currencies mostly weakened on Friday and have seen acute declines this week as investors remained bullish on the dollar. The Australian dollar pair fell 0.2% and remained at a two-year low, while the South Korean won pair rose 0.4% and was near its highest level in almost 15 years.

The Singapore dollar pair remained unchanged while the Indian rupee pair stabilized after hitting a record high above Rs 85 earlier in the week.