Asia FX weakens on recession woes, yen supported by yield cap bets By

By Ambar Warrick

-- Most Asian currencies retreated on FXCM foreign exchange platform official downloadThursday as weak U.S. economic data pushed up fears of a potential recession, while the Japanese yen recouped most of its recent losses on speculation that the Bank of Japan may yet increase its yield control range.

The was the best-performing Asian currency for the day, rising 0.5% to 128.29 against the dollar.

The currency had plummeted as much as 2.5% on Wednesday after the BOJ unexpectedly . But speculation that rising inflation will push the bank into eventually altering its ultra-loose policy saw the yen recover sharply from intraday lows.

Columbia University academic Takatoshi Ito, who is considered to be a candidate to join the BOJ, that hotter-than-expected inflation could eventually push the central bank into widening its benchmark bond yield range this year - a move that is positive for the yen.

Japanese is due this Friday, and is expected to read at 4%, twice the BOJ’s annual target.

Broader Asian currencies retreated as sentiment was dented by weaker-than-expected U.S. economic data, which brewed increasing fears of a potential recession this year. A global economic slowdown bodes poorly for risk-driven Asian currencies, given that capital flows into the region will likely slow as investors seek safer assets.

The sank 0.3%, while the led losses across Southeast Asia with a 0.3% decline. Losses in the yuan came even as International Monetary Fund Deputy Director Gita Gopinath said by as soon as the second quarter.

The was among the worst performers for the day, falling 0.5% after data showed that the country’s unexpectedly cooled from the record high in December. The trend, if sustained, will give the less economic headroom to keep hiking interest rates.

The fell 0.3%, but showed little reaction to news that by early-February.

The and retreated on Thursday, also taking mixed cues from . While Fed officials almost unanimously called for more interest rates, they offered differing takes on where U.S. interest rates will peak.

Focus on Thursday is also on an address by .

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