The yen’s USD/JPY pair increased 0.3% after dropping sharply

Most Asian currencies weakened slightly on Wednesday. Still, currencies were sitting on strong gains this week, with the yen having benefited the most. The yen was also aided by heightened speculation over currency market intervention by Tokyo, following a warning from top-level officials.

The Australian dollar remained perched near a three-year high after hotter-than-expected December inflation ramped up bets on a rate hike next week.

The Australian dollar’s AUD/USD pair dropped 0.3%, pulling back from a near three-year high hit in the prior session.

Australian consumer price index inflation read hotter than expected in December and the fourth quarter, data showed on Wednesday.

The figure ratcheted up bets that the Reserve Bank of Australia (RBA) will raise interest rates next week. ANZ and Capital Economics analysts said they now expect a 25 bps hike at the RBA’s upcoming meeting next week, although analysts appeared split over further rate hikes.

Broader Asian currencies mostly pulled back, but were sitting on strong gains this week.

The yen’s USD/JPY pair increased 0.3% after dropping sharply this week amid growing expectations of currency market intervention by Tokyo, especially after Prime Minister Sanae Takaichi warned against too much volatility in the yen.

Markets are also bracing for a potentially co-ordinated foreign exchange intervention by U.S. and Japanese authorities to stem weakness in the Japanese currency.

The yuan was an exception on Wednesday, with the USD/CNY pair dropping 0.1% to a 31-month low. The yuan has firmed steadily in recent months, amid continued support from Beijing.

The Singapore dollar’s USD/SGD pair gained 0.1%, while the Taiwan dollar’s USD/TWD pair added 0.2%.