Dollar Holds Steady Ahead of Fed Decision
The U.S. dollar remained stable in Asian trading on Wednesday, as investors focused on an upcoming policy decision from the Federal Reserve.
The dollar index and its futures held onto recent gains, supported by cautious market sentiment and positioning ahead of the central bank’s announcement. The Fed is widely expected to leave interest rates unchanged, with markets instead concentrating on guidance around inflation and future policy direction.
Focus on Powell’s Final Meeting
This meeting is also expected to be the last chaired by Jerome Powell, whose term ends on May 15. Meanwhile, Kevin Warsh appears closer to confirmation after political hurdles eased in Washington.
Investors are closely watching how the Fed will address inflation risks, especially after other global central banks have recently adopted a more hawkish stance due to rising geopolitical tensions.
Australian Dollar Weakens After CPI Data
The Australian dollar came under pressure after inflation data disappointed slightly. The AUD/USD pair fell 0.25% following the release of March and first-quarter consumer price index figures, which came in just below expectations.
Despite the softer reading, inflation still showed a notable monthly increase, largely driven by rising fuel prices linked to ongoing geopolitical tensions.
Inflation Outlook Keeps RBA on Edge
Core inflation remained relatively stable and above the Reserve Bank of Australia target range of 2% to 3%.
While the data eased immediate concerns of a sharper spike, it still supports the case for further rate hikes. The RBA has already increased interest rates by a cumulative 50 basis points in 2026 and signaled that more tightening may follow.
Analysts from ANZ expect another 25 basis point hike at the central bank’s upcoming May meeting.
Asian Currencies Weaken Amid Geopolitical Tensions
Most Asian currencies declined as investor sentiment remained fragile. Ongoing tensions between Washington and Tehran continue to weigh on markets, with concerns over a potential prolonged disruption in the Strait of Hormuz.
Donald Trump has reportedly instructed officials to prepare for an extended blockade, adding to market uncertainty.
Regional FX Moves and Market Activity
Trading volumes in Asia were subdued due to a market holiday in Japan. The Japanese yen weakened slightly, with the USD/JPY pair hovering near the 160 level, even after the Bank of Japan maintained its policy stance while signaling a more hawkish outlook.
Other regional currency movements included:
- The Chinese yuan (USD/CNY) remained largely unchanged
- The South Korean won (USD/KRW) rose 0.3%
- The Indian rupee (USD/INR) gained 0.3%, approaching the 95 level
- The Singapore dollar (USD/SGD) was flat
- The Taiwan dollar (USD/TWD) edged up 0.1%
Investors are also looking ahead to upcoming Chinese PMI data, which could provide further insight into regional economic momentum.
