Investing.com – Most Asian currencies rose slightly on Wednesday, gaining some ground against the weaker dollar as markets awaited new interest rate signals from key U.S. inflation data due later in the day.
Traders also became more confident that the Federal Reserve will not raise interest rates further in 2024 following comments from Chairman Jerome Powell on Tuesday. This idea caused some weakness in the dollar, even though industrial inflation data for April was surprising on the positive side.
However, most regional currencies have suffered sharp losses against the dollar in recent months as traders largely discounted most expectations of an interest rate cut in 2024.
Dollar stable as CPI data approaches
And both fell slightly in Asian trading on Wednesday, extending overnight losses even as data surprised with gains.
Comments from the Fed’s Powell, particularly that monetary policy is currently tight enough to eventually bring down inflation, were a key factor in the dollar’s decline.
But Powell also warned that the central bank was losing confidence that inflation was falling quickly and that price pressures could take longer to reach the bank’s annual 2% target.
His comments, as well as strong producer price index readings, have markets wary of potentially better-than-expected April numbers due later in the day. Any signs of persistent inflation would likely further dampen expectations for a rate cut in 2024, creating a strong outlook for the dollar and adding to headwinds for Asian markets.
Asia FX shows moderate growth
remove advertising
.
Overnight dollar weakness lent some strength to Asian currencies on Wednesday despite a number of weak domestic factors.
The Chinese yuan fell 0.1% despite the US imposing strict tariffs on key Chinese sectors such as electric vehicle batteries and semiconductors.
The move is expected to prompt retaliation from Beijing and could reignite a heated trade war between the world’s two largest economies, presenting a weak outlook for China.
The Japanese yen fell slightly but remained well above the 156 yen level as markets remained wary of further government intervention in the foreign exchange market. The government was last seen intervening at around 160 yen, which most traders thought was a new line in the sand.
This week’s focus will also be on Japan’s first-quarter data, due on Thursday.
The Australian dollar rose 0.4% despite a weaker-than-expected first quarter.
The Indian rupee pair was little changed after falling from a near-record high on Tuesday, while the Singapore dollar fell 0.1%.