Investing.com – Most Asian currencies were little changed on Wednesday while the dollar steadied as traders hunkered down ahead of a flurry of Federal Reserve signals on U.S. interest rates and key inflation data.
Sentiment towards Asia worsened on fears of renewed trade tensions between the US and China after media reports suggested the White House plans to tighten restrictions on chip sales to Russia, which could impact Chinese resellers.
China’s mediocre inflation data also raised concerns about the country’s sluggish economic recovery.
Chinese yuan weakens amid trade slump and average inflation
The Chinese yuan hovered near six-month highs on Wednesday as reports of tighter US trade controls dampened sentiment. The reports come just weeks after the US imposed increased tariffs on several key Chinese industries.
Mixed inflation data in China also raised some concerns about the country’s economic recovery. Although inflation fell at its slowest pace in 15 months in May, it rose less than expected, narrowly missing the decline zone.
Data showed that consumer spending, a key driver of the Chinese economy, remained weak even as manufacturing activity picked up.
All Asian currencies have been on a tear against the dollar recently as uncertainty over US interest rates kept traders biased towards the greenback.
The Japanese yen rose slightly and remained well above 157 yen. The currency received little support from a hotter-than-expected outlook that came shortly before the Bank of Japan meeting this week.
The Bank of Japan is set to meet on Friday and is likely to do so. But the central bank is also expected to tighten policy further by slowing the pace of bond purchases.
The Australian dollar rose 0.1%, while the South Korean won treaded water as did the Singapore dollar.
The Indian rupee pair hovered close to an all-time high as recent volatility triggered by the surprise 2024 general election result hit the rupee.
Dollar muted on Fed meeting and CPI data
On Wednesday, the index stabilized near monthly highs, having recovered in recent sessions in anticipation of Wednesday’s signals.
The Fed is expected to take a more aggressive stance on rates, citing recent resilience in inflation and strength in the labor market.
Pending the Fed’s decision, May data will be released on Wednesday. The data is also expected to show that inflation remained stable in May, giving the Fed little incentive to begin cutting rates.
The prospect of high US interest rates weighed heavily on Asian markets last year.