Asian Currencies Hold Steady as Traders Eye Federal Reserve and U.S. Inflation Data

Asian Currencies Hold Steady as Traders Eye Federal Reserve and U.S. Inflation Data

On Monday, most Asian currencies traded within a narrow range, while the U.S. dollar stabilized following recent losses. Market participants are now looking ahead to key signals from the Federal Reserve and upcoming U.S. inflation data.

Australian Dollar Gains Ahead of RBA Meeting

The Australian dollar (AUDUSD) stood out as one of the top performers, rising 0.3% in anticipation of the Reserve Bank of Australia (RBA) meeting. The RBA is expected to maintain interest rates but adopt a hawkish tone. Persistent inflation and a robust labor market could push the RBA to signal that interest rates will stay elevated for a longer period, which has supported the Australian dollar’s strength, with the currency nearing a 10-month high.

Muted Trading Due to Japanese Market Holiday

Regional trading volumes were lighter due to a market holiday in Japan. However, the Japanese yen (USDJPY) weakened, falling 0.3% to 144.32 against the U.S. dollar, pulling back from the nine-month peak it reached last week. Despite this, most Asian currencies held onto gains from the previous week, boosted by the Federal Reserve’s 50 basis point rate cut.

U.S. Dollar Steadies as Traders Await Fed and Inflation Data

The U.S. dollar index and dollar futures saw slight gains in early Asian trading, recovering from losses logged last week. The Federal Reserve’s rate cut has initiated an easing cycle, potentially leading to rate reductions of up to 125 basis points this year. However, the Fed signaled that neutral rates may remain higher than in previous cycles, limiting losses in the dollar.

Traders are closely monitoring several upcoming speeches from Fed officials, including Chair Jerome Powell, for further insights. The release of the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge, is also scheduled for this Friday, providing more clues on the Fed’s rate-cut plans.

Other Asian Currencies Trade in Tight Range

Across broader Asian markets, currencies traded mostly flat to slightly lower. The Chinese yuan (USDCNY) slipped marginally after the People’s Bank of China reduced its 14-day repo rate to stimulate economic growth. The South Korean won (USDKRW) rose 0.3%, while the Singapore dollar (USDSGD) gained 0.2%. The Indian rupee (USDINR) edged up by 0.1%, though it remained below recent record highs.