Investing.com – Most Asian currencies held in a narrow range on Wednesday as the dollar steadied ahead of new U.S. interest rate signals from the minutes of the recent Federal Reserve meeting.
The exception was the New Zealand dollar, which rose sharply after the Reserve Bank of New Zealand took a somewhat hawkish tone at its May meeting.
However, chilling optimism about China and concerns about continued high interest rates in the US are keeping most regional currencies moving in a narrow range. Cautious statements from Fed officials overnight also dampened sentiment.
Kiwi rises as RBNZ notes delay in rate cuts
The New Zealand dollar rose 0.9% to a more than two-month high on Wednesday after the RBNZ said it would delay any potential interest rate cut due to persistent inflation.
The RBNZ remained stable as expected. However, the bank said persistent inflation, especially due to difficult working conditions and high service prices, would likely delay any potential plans to cut rates. Bloomberg data showed traders forecast emissions cuts later in 2025.
However, the RBNZ said inflation was falling, albeit at a slower pace, and that price pressures were likely to fall within the target range of 1% to 3% by the end of 2024.
Dollar stable, Asia FX muted due to Fed protocol
Asian trading stabilized on Wednesday after some growth overnight. While the dollar still suffered from last week’s losses, it regained some of its lost ground this week as Fed officials continued to warn that more confidence was needed to begin cutting rates.
In this regard, further signals from the central bank were now expected, due later on Wednesday.
Most Asian currencies are treading water waiting for these signals. The Japanese yen showed sustained yen weakness, rising 0.1% to remain well above 156 yen.
Weak trade data from Japan, which was disappointing and better than expected for April, also weighed on the yen.
Key Japanese data for May will be published on Thursday.
The Chinese yuan was little changed and remained near a six-month high as traders awaited more signals on Beijing’s stimulus measures and the Chinese economy.
The Australian dollar remained unchanged, with May trading also due on Thursday.
The South Korean won fell 0.1% as data showed a slight rise in inflation in April.
Market holidays in Singapore, Malaysia and Thailand led to lower trading volumes in Southeast Asia.