Investing.com– Most Asian currencies moved in a flat-to-low range on Thursday as a rout in equity markets kept traders largely averse towards risk-driven assets, while the dollar retreated ahead of key economic indicators in the coming days.

The Japanese yen remained an outlier, rallying to its strongest levels against the dollar in over two months as an unwinding carry trade, increased safe haven demand and anticipation of an interest rate hike by the Bank of Japan boosted the currency. 

Concerns over China also factored into caution towards Asia, as surprise interest rate cuts by the People’s Bank did little to improve sentiment. The yuan remained close to its weakest levels in eight months, while China-exposed currencies such as the Australian dollar and the New Zealand dollar saw extended selling. 

Yen surges as carry trade unwinds, BOJ approaches 

The Japanese yen continued to outpace its regional peers, with the pair dropping 1% to 152.38 yen- its lowest level since early-May. 

Initial gains in the yen were sparked by suspected currency market intervention by the Japanese government earlier in July. But this squeezed short positions on the yen, which fueled an extended rally in the currency, beyond the apparent government intervention.

Strength in the yen also came ahead of a next week, where policymakers are expected to consider a 10 basis point hike amid some signs of resilience in the Japanese economy. 

Dollar eases with GDP, PCE data on tap 

The and both fell slightly in Asian trade, extending an overnight decline amid increasing confidence that the Federal Reserve will cut interest rates in September.

data for the second quarter- due later on Thursday, along with data- due on Friday, is expected to provide more cues on any potential rate cuts by the Fed.

The , and is widely to keep interest rates steady while signaling a rate cut in September. Dovish rhetoric from Fed officials in recent weeks furthered this notion.

But broader Asian currencies took little relief from a weaker dollar or prospects of lower rates, as risk appetite remained largely on the backfoot. 

The Chinese yuan’s pair hovered around an eight-month high amid persistent concerns over a slowing economic recovery in the country. Surprise rate cuts by the People’s Bank added to pressure on the currency and did little to lift spirits over the Chinese economy.

Concerns over China saw the Australian dollar’s pair sink 0.4% to a near three-month low, while the New Zealand dollar’s pair lost 0.2%. 

The South Korean won’s pair rose 0.4%, with sentiment towards the country also dented by weaker-than-expected GDP data for the second quarter.

The Singapore dollar’s pair moved little amid some safe haven trades, while the Indian rupee’s pair hovered just below a record high of over 83.8 rupees.