Asia FX Steady, Dollar Subdued Ahead of US CPI; Japan Inflation, PMI in Focus
Asian currencies and the dollar remained mostly unchanged on Friday as traders awaited the upcoming release of U.S. consumer price index (CPI) data. Investors stayed cautious, digesting fresh figures on Japanese inflation and factory activity before taking new positions.
The US Dollar Index (DXY) rose slightly by 0.1%, putting it on track for a 0.6% weekly gain. Similarly, Dollar Index Futures traded 0.1% higher as of 04:58 GMT, showing limited movement ahead of key economic data.
Investors Await US CPI Data and Fed Decision
The U.S. CPI report, delayed earlier this month due to a government shutdown, is now expected later on Friday. The data is seen as a major factor shaping expectations for next week’s Federal Reserve policy meeting.
Markets broadly expect the Fed to deliver a 25-basis-point rate cut, given signs of a cooling labor market. According to analysts at ING, “Consensus expects headline prices to rise around 0.4% month-on-month, and the core measure to increase by roughly 0.3%.”
They added that while tariffs may become more visible in the coming months, the Fed’s main concern remains the slowdown in jobs growth—leaving room for a rate cut later this month.
Asian Currencies Hold Tight Ranges
Most Asian currencies traded in narrow ranges as investors avoided large bets before the U.S. inflation release.
In China, the onshore yuan (USD/CNY) was steady, while the offshore yuan (USD/CNH) inched 0.1% higher. The South Korean won (USD/KRW) gained 0.1%, and the Singapore dollar (USD/SGD) also traded slightly stronger. Meanwhile, the Indian rupee (USD/INR) edged 0.1% lower, and the Australian dollar (AUD/USD) slipped by 0.2%.
Adding to the geopolitical backdrop, the White House confirmed that President Donald Trump will meet Chinese President Xi Jinping in Seoul next week. The meeting is expected to boost hopes for progress in U.S.–China trade relations.
Japan Inflation Rises, Factory Activity Weakens
Fresh data from Japan showed that core consumer inflation rose 2.9% year-on-year in September, while the broader “core-core” measure—excluding food and energy—climbed 3.0%. Both readings stayed above the Bank of Japan’s (BoJ) 2% target, reinforcing expectations that policymakers could soon discuss further tightening.
However, Japan’s factory activity weakened in October, slipping to its lowest level in 19 months and signaling continued pressure on the manufacturing sector. The services PMI also eased but remained resilient thanks to strong domestic demand.
ING analysts noted that “Japan’s core inflation staying above 3% supports the BoJ’s normalization path. Although a split vote may occur at the October meeting, it is unlikely to change the policy course.” They added that a December rate hike now appears to be the most likely outcome.
