Investing.com– Most Asian currencies rose on Wednesday ahead of further interest rate cut signals from the Federal Reserve, while the Japanese yen was volatile on mixed signals from the Bank of Japan.

The Australian dollar was an outlier among regional currencies, falling to a three-month low after data showed a gentle slowdown in the core consumer price index, reducing the likelihood of the Reserve Bank of Australia raising interest rates.

Yen Unstable, USDJPY Fluctuates on Mixed Signals BOJ

The Japanese yen was highly volatile, with the exchange rate hovering around 0.3% around 0% after the Bank of Japan adopted a mixed stance at its meeting.

The central bank raised interest rates by 15 basis points to around 0.25%, the highest level expected by market participants.

But the company also said it would only cut the pace of its purchases of Japanese government bonds by half, from 6 trillion yen ($19.5 billion) to 3 trillion yen ($19.5 billion) by the first quarter of 2026. The BOJ will reduce its purchases of Japanese government bonds by 400 billion yen each quarter.

Bank of Japan members also lowered their growth and inflation forecasts for fiscal 2024, raising uncertainty about how much the central bank will be able to tighten policy.

Still, the yen gained in July as a combination of carry trade unwinds and suspicions of government intervention boosted demand for the currency.

Dollar falls as Fed looks to cut interest rates

Currencies fell 0.2% in Asian trading, seeing some volatility this week as investors prepared for the Fed’s session on Wednesday.

The central bank is widely expected to keep rates on hold. But any signs of a rate cut will be closely watched, especially in the face of some supple inflation readings and dovish comments from Fed officials.

According to , the general view is that there will be a 25 basis point cut in September.

This week, attention will also be focused on key data due to be released on Friday.

Australian dollar falls, AUDUSD hits 3-month low on low inflation

The Australian dollar was the worst performer in Asia, falling 0.5% to a three-month low.

The Australian dollar’s ​​decline was mainly driven by some frail CPI data for the June quarter. While overall growth was in line with expectations for the quarter, the lower growth raised hopes that inflation would ease in the coming months, reducing the need for the RBA to hike rates.

Broader Asian currencies rose, tracking dollar weakness. The Chinese yuan fell 0.2% as frail data and positive government comments raised expectations for more stimulus at home.

The South Korean won fell 0.3%, while the Singapore dollar traded sideways.

The Indian rupee held near its record high of 83.8, finding little relief from the weakening dollar.