Most Asian currencies moved little on Wednesday, while the dollar steadied from recent declines as markets awaited a widely expected interest rate cut by the Federal Reserve later in the day.
Most regional currencies were sitting on strong gains against the dollar in recent sessions, as increasing confidence in a U.S. rate cut stymied the greenback. The dollar slid to a two-month low on Tuesday.
But some weak economic readings weighed. The Japanese yen retreated on mixed trade data, while the Singapore dollar was pressured by a dismal export reading.
Anticipation of a Bank of Japan meeting this week also kept markets on edge.
Japanese yen pressured by mixed trade data; BOJ in sight The Japanese yen’s USD/JPY pair rose 0.1% on Wednesday after falling sharply in the prior session.
Data showed the country’s trade balance shrank less than feared in August, with exports also falling less than expected as a recent trade deal with the U.S. offered some clarity.
But exports still remained in contraction, while substantially softer-than-expected imports signaled that local demand remained weak.
The print comes just days before a BOJ meeting, where the central bank is widely expected to leave interest rates unchanged amid heightened political uncertainty in the country.
Still, the BOJ may offer hawkish signals amid sticky Japanese inflation and relatively steady private spending. Japanese consumer inflation data for August is due before the BOJ’s rate decision on Friday.
Among broader Asian currencies, the Singapore dollar’s USD/SGD pair rose 0.1% as the country’s key non-oil exports unexpectedly shrank in August.
The Chinese yuan’s USD/CNY pair fell 0.1%, encouraged by pledges of more stimulus measures from Beijing. Sustained policy support in currency markets saw the yuan perched at its strongest level since November 2024.
The Australian dollar’s AUD/USD pair fell 0.1% after clocking strong gains in recent sessions, while the Indian rupee’s USD/INR pair fell 0.1%, retreating from record highs hit earlier in September.
The South Korean won’s USD/KRW pair rose 0.1%.
Dollar steadies with Fed rate cut, outlook in focus The dollar index and dollar index futures both rose 0.1% in Asian trade, recovering from a two-month low.
The greenback was battered by increasing conviction that the Fed will cut rates by at least 25 basis points on Wednesday, especially amid increasing signs of a cooling labor market. Some traders were also holding out for a larger 50 bps cut.
But markets were uncertain over what the Fed will signal with regards to future monetary easing, especially given that recent economic prints also showed U.S. inflation remaining sticky.
Fed Chair Jerome Powell has repeatedly flagged caution over the inflationary impact of higher U.S. trade tariffs, which in turn could delay future rate cuts.
