Asian currencies and the U.S. dollar moved very little on Wednesday. Investors are preparing for a possible interest rate cut from the Federal Reserve, yet overall sentiment remains cautious. Many still expect the central bank to maintain a hawkish tone even if it reduces rates.
The U.S. Dollar Index was almost unchanged. Dollar Index Futures fell 0.4% by 04:02 GMT, reflecting expectations of a rate cut.
Fed Expected to Send a Hawkish Signal
Markets widely expect a 25 basis-point cut. However, reports suggest policymakers remain divided, which is keeping investors alert.
Attention is now on Fed Chair Jerome Powell and any guidance he may offer on interest rates heading into 2026. Traders are watching closely for clues on how the Fed will support the economy while still keeping inflation under control.
Analysts from ING said that not delivering a cut “is not a viable option,” but warned that the decision will likely be a hawkish cut, with strong hints of a pause in January.
MUFG analysts added that markets will study Powell’s comments and the Summary of Economic Projections. They noted that 2026 could bring important personnel changes to the FOMC, including the chair position itself.
Asian Currency Movements
The Japanese yen slipped slightly, with USD/JPY down 0.1%.
The Singapore dollar held steady, and USD/SGD traded flat.
South Korea’s won (USD/KRW) inched up 0.1%.
India’s rupee (USD/INR) gained 0.3%, staying close to recent record highs.
China Data Shows Ongoing Deflation
China’s yuan also traded quietly, with both USD/CNY and USD/CNH remaining muted.
New inflation data from China pointed to persistent deflationary pressures, despite a small rise in consumer prices. The consumer price index (CPI) increased 0.7% year-on-year in November, in line with expectations and the strongest reading since mid-2024.
However, CPI fell 0.1% from October, signaling weak demand. This suggests the annual increase was influenced mainly by base effects and volatile food prices.
The factory sector showed even more stress. The producer price index (PPI) dropped 2.2% year-on-year in November, slightly worse than October’s decline.
This marks nearly four years of falling industrial prices, underscoring the deep and persistent deflationary pressures within China’s manufacturing industry.
