Investing.com – Most Asian currencies traded in a tight range on Wednesday as investors digested the latest round of stimulus from China, while the dollar hovered near two-month highs on bets of smaller interest rate cuts.

Regional currencies posted some losses over the past two weeks as signs of resilience in the U.S. economy prompted speculation that the Federal Reserve would cut interest rates less than expected. This concept strengthened the dollar.

Doubts about China also confined sentiment towards Asia after Beijing failed to provide key details when discussing plans for further stimulus.

Dollar close to 2-month high with bets on smaller interest rate cuts

Rates and fell slightly in Asian trade, remaining close to the highest level in two months at the beginning of the week.

The dollar was supported by rising expectations that the resilience of the US economy would result in a slower pace of Fed rate cuts. Recent readings on consumer inflation in the US and the labor market confirmed this thesis.

Traders were pricing in a 94.1% chance that the Fed would cut interest rates by 25 basis points in November – lower than the 50 basis point cut seen in September. Traders also priced in the slim chance of keeping rates unchanged.

Speeches by several Fed officials this week showed that policymakers were cautious about future interest rate cuts. Data released later this week is expected to provide more clues about the U.S. economy.

The prospect of relatively high interest rates has seen most Asian currencies post losses over the past two weeks. Regional units were also muted on Wednesday.

The Japanese yen pair fell slightly but remained within sight of 150 yen. Consumer inflation data released later this week is expected to provide more clues about the Bank of Japan’s plans to raise interest rates further.

The South Korean won pair fell 0.3%, while the Singapore dollar pair fell 0.1%. The Indian rupee pair fell slightly but remained near recent record highs.

The Chinese yuan has lost value on stimulus doubts

The Chinese yuan pair showed little movement on Wednesday, but has swung to losses this week as sentiment soured amid plans to further stimulate the country.

China’s Ministry of Finance said it would introduce a series of fiscal measures to boost economic growth. However, the Ministry of Finance did not specify the date or size of the planned activities, which caused confined optimism regarding the planned move.

Weak economic data from China also highlighted the need for more sophisticated measures.

Doubts over China sent the Australian dollar pair down 0.2%, given the currency’s bulky exposure to trade with the continent.