Asian currencies and the U.S. dollar were mostly steady on Wednesday after Federal Reserve Chair Jerome Powell struck a cautious tone on future rate cuts. The Australian dollar, however, gained ground after hotter-than-expected inflation data raised concerns about upcoming Reserve Bank of Australia (RBA) policy decisions.
The U.S. Dollar Index, which tracks the greenback against six major currencies, rose 0.1%, holding steady after failing to extend its rebound beyond pre-Fed decision levels. Futures on the index also traded 0.1% higher as of 03:46 GMT.
Powell signals caution on rates
In his Tuesday speech, Powell stressed the challenge of balancing inflation control with risks to employment. He said there is no “risk-free path” as the Fed manages sticky inflation and slowing job growth.
Chicago Fed President Austan Goolsbee later added that the central bank has room to cut rates if inflation continues to ease. Still, he warned against aggressive moves, citing persistent inflationary pressures.
Markets currently expect two more rate cuts this year, consistent with the Fed’s guidance. Powell, however, gave no clear signals on the timing of the next cut, leaving investors uncertain.
Among regional currencies, the Japanese yen edged 0.1% higher against the dollar, while the South Korean won traded flat. The Singapore dollar inched up 0.1%, and the Indian rupee was little changed. Both the onshore and offshore Chinese yuan also slipped 0.1%.
Traders now await Friday’s U.S. core Personal Consumption Expenditures (PCE) inflation report, the Fed’s preferred gauge, for further direction.
Aussie dollar lifted by hot CPI
Australia’s consumer price index (CPI) rose 3.0% year-on-year in August, the fastest pace in a year and slightly above forecasts of 2.9%.
The RBA cut rates at its last meeting and signaled more reductions if data justified the move. Its next policy meeting is set for September 29-30, with markets expecting no change to the 3.6% cash rate before a possible cut in November.
While headline inflation hit the top of the RBA’s target range, trimmed mean core inflation eased slightly to 2.6% from 2.7% in July. Still, the data stoked doubts about how much room the central bank has to cut further.
The Australian dollar rose 0.4% against the U.S. dollar on Wednesday.
New RBNZ governor appointed
New Zealand named Anna Breman as the next Governor of the Reserve Bank of New Zealand, effective December 1. Breman, 49, will become the first woman and the first foreign national to lead the RBNZ. She previously served as First Deputy Governor at Sweden’s Riksbank.
The New Zealand dollar traded largely flat against the U.S. dollar after the announcement.
