Asian currencies traded in a narrow range on Thursday as investors remained cautious ahead of key U.S. inflation data due later in the session. Markets were also closely watching Japan, where expectations are building for a potential interest rate hike by the Bank of Japan.
The U.S. dollar showed little movement. The Dollar Index, which tracks the greenback against a basket of major currencies, was flat, while Dollar Index futures edged 0.1% higher by 04:40 GMT.
Markets await U.S. inflation data for Fed signals
Currency trading across Asia remained subdued as investors waited for the release of the U.S. consumer price index. The inflation report is expected to offer fresh insight into the Federal Reserve’s interest rate outlook.
Earlier U.S. labor market data pointed to signs of cooling, but failed to provide clear guidance on when the Fed may begin easing policy. As a result, currency markets have struggled to find direction.
Uncertainty around U.S. monetary policy was further reinforced by comments from President Donald Trump, who said this week that the next Federal Reserve chair would strongly support lower interest rates.
Trump has named several potential successors, including former Fed Governor Kevin Warsh, current Fed Governor Christopher Waller, and White House economic adviser Kevin Hassett. Markets generally view all three as more dovish than the current Fed leadership.
Asian currencies trade mixed
In regional FX markets, the South Korean won weakened slightly, with USD/KRW rising 0.2%. The Singapore dollar was steady, with USD/SGD largely unchanged.
India’s rupee also softened, with USD/INR climbing 0.2% after the currency retreated from record highs in the previous session amid signs of possible central bank intervention.
China’s onshore yuan remained stable, with USD/CNY showing little movement, while the Australian dollar slipped modestly, with AUD/USD down 0.1%.
BOJ rate hike in focus as yen steadies
Attention in Asia remained firmly on Japan, where the Bank of Japan began a two-day policy meeting on Thursday. The central bank is widely expected to raise interest rates on Friday as it continues to unwind years of ultra-loose monetary policy.
Persistent inflation above the BOJ’s 2% target, rising wage growth and stronger domestic demand have increased expectations for further tightening, despite lingering concerns over global economic growth.
The Japanese yen was little changed, with USD/JPY edging up 0.1%.
“With markets already pricing in a potential BOJ hike, forward guidance on the policy path will be critical in shaping the yen’s outlook,” MUFG analysts said in a research note.
