Most Asian currencies kept to a tight range on Thursday as traders digested mixed signals from the Federal Reserve, while the yen lost some ground after the Bank of Japan kept interest rates steady and reiterated its policy outlook.
Markets took middling cues from a meeting between U.S. President Donald Trump and Chinese President Xi Jinping, which offered limited insight into how the two economic giants planned to deescalate their trade conflict.
The dollar fell in Asian trade, facing some profit-taking after rising sharply in overnight trade. While the Fed did cut rates as expected, it also downplayed expectations of a December rate cut, amid increased caution over the U.S. economy.
Chinese yuan retreats from 1-yr high as Trump and Xi meet in South Korea The Chinese yuan’s USDCNY pair reversed early losses and traded up 0.1% at 7.1022 yuan, following the conclusion of the Trump-Xi meeting. The yuan retreated from its strongest level in a year.
Trump, speaking to reporters after the meeting, said he saw a trade deal with China coming "pretty soon," and that the two had also agreed to deals on rare earths and agriculture purchases.
The U.S. will also halve its fentanyl-related tariff on China to 10%, bringing its effective tariff rate on the country to 47% from 57%, Trump said.
But the president, while striking a positive chord on the meeting, offered few clear details on just when and how the U.S. and China will wind down their trade conflict. Trump said he will visit China in April.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads. The yuan had firmed past increased U.S.-China trade tensions, being supported chiefly by the PBOC as it sought to boost exports with a stronger yuan. Pledges of more stimulus from Chinese officials also helped sentiment.
Trump’s meeting with Xi comes as part of a week-long Asian tour, with the U.S. president having met leaders in Japan and South Korea earlier this week.
Japanese yen edges lower as BOJ leaves rates unchanged The Japanese yen’s USD/JPY pair reversed course to rise 0.2% after the BOJ left interest rates unchanged and flagged a cautious outlook on the economy.
The yen was already nursing steep overnight declines after the Fed meeting.
The BOJ on Thursday warned that Japan faced heightened economic uncertainty in the near-term, but that accommodative financial conditions would offset some of this impact. The central bank also largely reiterated its messaging that it will raise interest rates if the economy and inflation rise in line with its forecasts.
The BOJ slightly tweaked its growth and inflation forecasts for 2025 and 2026.
The yen had weakened in the run-up to the BOJ meeting, as fiscal dove Sanae Takaichi’s election as prime minister ramped up bets on looser monetary conditions in the coming years.
The BOJ is also expected to face political resistance towards raising interest rates further, with Governor Kazuo Ueda widely expected to address Japan’s shifting economic climate during a post-meeting conference.
