Asian Currencies Steady After Strong U.S. Inflation Data
Asian currencies traded mostly unchanged on Wednesday following strong gains in the previous session, as higher-than-expected U.S. inflation data reduced expectations for Federal Reserve interest rate cuts. The stronger inflation figures supported the U.S. dollar and pushed Treasury yields higher.
The U.S. Dollar Index remained close to a one-week high during Asian trading after climbing 0.4% on Tuesday.
Hot U.S. CPI Reduces Fed Rate Cut Expectations
Data released on Tuesday showed that U.S. consumer prices increased 3.8% in April compared with a year earlier. The figure marked the largest annual rise since May 2023 and came in above market forecasts, increasing concerns that the Federal Reserve could keep interest rates elevated for a longer period.
Following the inflation report, investors largely ruled out expectations for any Federal Reserve rate cuts this year, while market bets on a potential rate hike increased slightly.
Asian Currency Performance
The Japanese yen weakened slightly, with the USD/JPY pair rising 0.1% after gaining 0.3% in the previous session.
South Korea’s won traded mostly flat after the USD/KRW pair surged 1.3% on Tuesday.
The Indian rupee remained near record-low levels after the USD/INR pair reached an all-time high of 95.7375 rupees in the previous session. The pair traded near 95.68 rupees on Wednesday.
Meanwhile, the Singapore dollar and Australian dollar showed little movement, with both USD/SGD and AUD/USD trading largely unchanged.
Trump-Xi Meeting in Focus
China’s yuan remained near a three-year low, although it continued to outperform several regional currencies in recent sessions.
Investors are closely monitoring the meeting between U.S. President Donald Trump and Chinese President Xi Jinping in Beijing, scheduled to take place from May 13 to May 15, according to official Chinese government announcements.
The discussions are expected to cover trade relations, artificial intelligence, tariffs, rare earth exports, and the ongoing Iran conflict.
Middle East Tensions Add to Market Pressure
Market sentiment remained cautious due to continued geopolitical tensions in the Middle East. Optimism surrounding potential U.S.-Iran negotiations weakened after Trump described a ceasefire proposal as “on life support” and criticized Tehran’s demands.
The ongoing conflict has continued to disrupt oil shipments through the Strait of Hormuz, keeping crude oil prices above $100 per barrel and contributing to global inflation concerns.
