Asian Currencies Stay Flat as Fed Uncertainty Lingers; Aussie Steady After RBA Hold
Most Asian currencies traded little changed on Tuesday as investors digested mixed signals from Federal Reserve officials about the future direction of U.S. interest rates. The Australian dollar also remained muted after the Reserve Bank of Australia (RBA) kept its benchmark rate steady, as widely expected.
The U.S. Dollar Index held near a three-month high, supported by growing market expectations that the Federal Reserve will maintain higher interest rates for longer.
RBA Keeps Rates Steady as Inflation Persists
The Australian dollar (AUD/USD) pair was stable after the RBA left its cash rate unchanged at 3.60%. The central bank noted that inflation remains higher than anticipated and emphasized the need for patience to bring price pressures back to target levels.
Officials gave few hints about when the next rate-cut cycle could begin, suggesting that monetary policy will stay tight in the near term.
Fed Uncertainty Keeps Dollar Strong
Traders have scaled back expectations for another U.S. rate cut in December after Fed Chair Jerome Powell delivered a hawkish message last week, stressing that policymakers will act cautiously after the first rate cut of the cycle.
On Monday, several Federal Reserve officials added to the uncertainty with contrasting views on the economy. Governor Lisa Cook described December as a “live” meeting for possible easing but reiterated that policy is “not on a preset course.” She warned that risks remain for both inflation and employment.
Meanwhile, Governor Stephen Miran argued that monetary policy might still be too tight, cautioning that strong markets could hide underlying economic weakness that requires deeper cuts.
San Francisco Fed President Mary Daly struck a middle ground, calling last week’s cut “insurance” and urging patience, saying the Fed should “watch the data carefully” before making further moves.
This divergence in tone highlighted the uncertainty facing markets, particularly as the U.S. government shutdown continues to delay key economic data releases.
Asian FX Trades Narrowly Against the Dollar
Across Asia, regional currencies remained range-bound against the greenback.
- The Japanese yen (USD/JPY) dipped 0.2%.
- The Singapore dollar (USD/SGD) traded flat.
- The Chinese yuan (USD/CNY) was steady onshore, while the offshore yuan (USD/CNH) inched 0.1% higher.
- The South Korean won (USD/KRW) rose 0.7%, outperforming regional peers.
- The Indian rupee (USD/INR) edged 0.1% lower, while the Indonesian rupiah (USD/IDR) gained 0.4%.
Overall, the Asia FX market remained subdued, reflecting investor caution amid global monetary policy uncertainty and persistent U.S. dollar strength.
