Most Asian currencies traded in a narrow range on Wednesday, while the dollar also steadied. Traders focused on rising expectations of U.S. interest rate cuts and awaited key inflation data later this week.
The Chinese yuan slipped after August inflation figures confirmed that disinflation continues to weigh on Asia’s largest economy. The USD/CNY pair rose 0.1%, paring recent gains. The move came after a series of stronger fixings had pushed the yuan to a near 10-month high earlier this month.
China’s consumer price index (CPI) fell 0.4% in August, a bigger decline than expected. The drop suggested weakening private spending and faltering demand as Beijing’s earlier subsidies expired. Meanwhile, the producer price index (PPI) dropped 2.8%, marking its 35th straight month of contraction. Analysts said the data underscored the need for more stimulus measures from Beijing to stabilize growth.
Despite the pullback, the yuan remains higher over the past month, supported by Chinese authorities who aim to encourage exports. However, more stimulus or monetary easing could put renewed pressure on the currency.
Broader Asian FX markets were mixed. The Japanese yen stabilized around 147.45 per dollar after volatility linked to the resignation of Prime Minister Shigeru Ishiba. The Australian dollar rose 0.2%, supported by firmer commodity prices, as oil gained on Middle East tensions and copper rose after the shutdown of a major Indonesian mine.
The Singapore dollar held steady, while the Indian rupee slipped 0.1% after Donald Trump confirmed that U.S.-India trade talks would continue. Trump also warned of possible 100% tariffs on Indian imports due to the country’s Russian oil purchases. India already faces 50% tariffs on several exports. The South Korean won weakened 0.1%.
The dollar index moved little in Asian trade, hovering near seven-week lows. Investors remain confident that the Federal Reserve will cut rates at its September 16–17 meeting. CME FedWatch shows a 95.3% chance of a 25 basis point cut and a 4.7% chance of a 50 bps cut.
Markets now await fresh U.S. inflation data. PPI figures are due Wednesday, while CPI inflation will be released Thursday. Traders will watch closely for signs of price pressures, especially after a new round of Trump tariffs took effect last month.
