Most Asian currencies maintained a narrow range on Wednesday, the dollar pulled back slightly from its two-year highs as traders awaited crucial U.S. Consumer Price Index (CPI) data. This report is expected to shape interest rate expectations significantly.
Adding to market tension, investors are closely watching U.S. President Donald Trump’s proposed trade tariffs. Comments from Federal Reserve officials, scheduled for later this week, may also provide fresh insights.
The Chinese yuan (USD/CNY) held near a 16-month high. Meanwhile, the Australian dollar (AUD/USD) dipped by 0.2%, nearing a five-year low. Pressures from potential U.S. interest rate hikes weighed on most Asian currencies.
In Japan, the yen (USD/JPY) remained flat. Even with the Bank of Japan’s hints at possible rate adjustments, the currency showed little movement.
The Singapore dollar (USD/SGD) rose 0.1%, while the Indian rupee (USDINR) slightly recovered after touching a record low. Recent data revealed Indian consumer inflation fell to a four-month low, providing a glimmer of relief.
The dollar index steadied in Asian trade after a decline from its two-year peak. This retreat followed weaker-than-expected U.S. Producer Price Index (PPI) data. The softer reading sparked hopes that inflation might ease, potentially giving the Federal Reserve room to slow interest rate hikes.
However, certain components of the PPI, which influence the Fed’s preferred inflation gauge (PCE), remained strong. These figures suggest underlying inflation could still be sticky.
The upcoming CPI data is now a key focus, as persistent inflation may compel the Federal Reserve to keep interest rates higher for longer.
In South Korea, the won (USD/KRW) showed stability despite political turbulence. President Yoon Suk Yeol was arrested over allegations of attempted military law imposition in December. This marks a possible resolution to political uncertainty that had weighed heavily on the South Korean currency.
The political developments, coupled with economic pressures, have caused the won to fall to its weakest levels since 2009.
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