Most Asian currencies weakened slightly on Wednesday as the dollar rose from a near four-year low hit in the prior session, with focus squarely on an upcoming interest rate decision by the Federal Reserve.
Still, regional units were sitting on strong gains this week as the dollar retreated, with the Japanese 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.
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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.
Dollar rises from near 4-yr low as Fed decision looms The dollar index rose nearly 0.4% in Asian trade, while dollar index futures fell 0.1%.
The greenback had slumped to its weakest level since February 2022 on Tuesday amid growing uncertainty over the U.S. economy and President Donald Trump’s policies.
Selling in the dollar hit a peak after Trump brushed off concerns over its recent weakness on Tuesday.
Focus is now squarely on the conclusion of a Fed meeting later in the day, where the central bank is widely expected to leave interest rates unchanged at 3.75%.
Markets will also be watching for any comments from Fed Chair Jerome Powell on future rate decisions, as well as growing pressure from the White House to loosen policy.
Trump said in a Tuesday address that he was close to naming a nominee to replace Powell, and that rates will fall sharply with new leadership at the Fed. He also kept up his criticism of Powell.
Australian dollar falls from near 3-yr high; hot CPI boosts rate hike bets The Australian dollar’s AUD/USD pair fell 0.3%, retreating 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 reading ratcheted up bets that the Reserve Bank of Australia will hike 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 increases.
Broader Asian currencies mostly retreated, but were sitting on strong gains this week as the dollar tumbled.
The Japanese yen’s USD/JPY pair rose 0.3% after falling 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 Chinese yuan was an outlier on Wednesday, with the USD/CNY pair falling 0.1% to a 31-month low. The yuan has strengthened steadily in recent months, amid continued support from Beijing.
The Singapore dollar’s USD/SGD pair rose 0.1%, while the Taiwan dollar’s USD/TWD pair rose 0.2%.
The Indian rupee was also an outlier among its peers, as uncertainty over the Indian economy and a U.S. trade deal saw the currency take little relief from recent weakness in the dollar.
The USD/INR pair rose 0.1%, remaining above 91 rupees and close to a record high.
