Most Asian currencies moved in a tight band on Tuesday as uncertainty over more U.S.-Iran peace talks, before the expiration of a ceasefire this week, kept traders to the sidelines.
The dollar steadied in Asian trade as focus turned to a Senate confirmation hearing for President Donald Trump’s Federal Reserve Chair nominee Kevin Warsh, scheduled for later in the day.
The Japanese yen weakened slightly amid growing conviction that the Bank of Japan will not hike interest rates next week, while the Australian dollar was flat as regional risk appetite remained subdued.
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Dollar steady as Warsh confirmation hearing looms The dollar index and dollar index futures rose slightly in Asian trade, remaining close to their weakest levels since early-March.
Warsh, in prepared remarks to be delivered to the Senate Banking Committee on Tuesday, said the Federal Reserve must be largely independent of political influence, but should also remain focused on its primary goals.
His independence from the Fed will be a key point of focus, especially amid repeated calls by Trump for more interest rate cuts. While Warsh has supported lower rates in the past, he has also criticized the Fed’s asset buying operations and favored a leaner balance sheet.
His nomination by Trump in late-January was viewed as less dovish than markets were expecting.
Incumbent Fed Chair Jerome Powell’s term is set to expire on May 15. But several lawmakers have committed to block Warsh’s confirmation until the Trump administration drops a criminal probe into Powell, which has been criticized as a threat to its independence.
Japanese yen weak, Asia FX muted with Iran in focus The Japanese yen’s USD/JPY pair rose 0.1% after Reuters reported the BOJ is likely to hold off on raising interest rates next week, as expectations of a prolonged war in the Middle East pointed to more inflationary pressures.
While Japanese inflation has steadily trended lower in recent months, the BOJ has warned that increased fuel and import costs are likely to spur a reversal to the upside– a scenario that warrants more rate hikes.
Broader Asian currencies tread water as markets sought more cues on U.S.-Iran peace talks, especially before the expiry of a tenuous ceasefire on Wednesday. Trump said a U.S. delegation will arrive in Pakistan for more talks this week, while Iran said more talks appeared unfeasible under current circumstances.
But reports said Iran had told regional mediators it was also sending a delegation to Islamabad this week.
Oil prices had rebounded on Monday, spooking regional markets. But they cooled on Tuesday, as markets still held out some hope for a de-escalation in Iran.
The Chinese yuan’s USD/CNY pair was flat, as was the Singapore dollar’s USD/SGD.
The Australian dollar’s AUD/USD pair fell slightly, as did the Indian rupee’s USDINR.
The New Zealand dollar was an exception, with the NZD/USD pair rising 0.3% after first-quarter consumer inflation data read stronger than expected and also crossed the Reserve Bank’s target range.
