Asia FX remains stable, dollar unchanged due to CPI, Fed meeting approaching

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Asia FX remains stable, dollar unchanged due to CPI, Fed meeting approaching – Most Asian currencies were flat on Wednesday, while the dollar strengthened as investors lowered ahead of an influx of signals from the Federal Reserve on US interest rates and key inflation data.

Sentiment toward Asia was dampened by fears of renewed U.S.-China trade tensions after media reports said the White House planned tighter curbs on chip sales to Russia, which could impact Chinese sellers.

China’s average inflation data also raised concerns about the country’s leisurely economic recovery.


The Chinese yuan has lost value amid trade restrictions and moderate inflation

The Chinese yuan pair hovered near six-month highs on Wednesday as reports of increased U.S. trade controls dampened sentiment. The reports come just weeks after the United States introduced increased tariffs on several key Chinese industries.

Mixed inflation data in China has also raised some concerns about the country’s economic recovery. Although inflation fell at the slowest pace in 15 months in May, inflation rose less than expected, barely staying above dwindling territory.

The reading indicated that consumer spending – a key driver of China’s economy – remained feeble even as factory activity picked up.

All broader Asian currencies have seen recent declines against the dollar as uncertainty over U.S. interest rates kept investors skeptical of the greenback.

The Japanese yen pair rose slightly and remained well above 157 yen. The currency received little support from a warmer-than-expected side that occurred just ahead of this week’s Bank of Japan meeting.

The BOJ meeting is scheduled for Friday and is likely to happen. However, the central bank is expected to tighten policy further by reducing the pace of bond purchases.

The Australian dollar pair rose 0.1%, while the South Korean won pair fell, as did the Singapore dollar pair.

The Indian rupee pair was trading near record highs as recent volatility in the wake of the surprising 2024 general election result weakened the rupee.

The dollar muted after the Fed meeting and CPI data

On Wednesday, the rate stabilized near monthly highs, after rebounding in recent sessions in anticipation of Wednesday’s signals.

The Fed is widely expected to do so and may present a more hawkish stance on the path of interest rates, citing recent inflation stickiness and strength in the labor market.

Before the Fed’s decision on Wednesday, we will know the data for May. The reading is also expected to show that inflation remained flat in May, giving the Fed little impetus to begin cutting interest rates.

Last year, the prospect of high interest rates in the US had a major impact on Asian markets.


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