Asian Currencies Hold Steady as Dollar Awaits Fed Rate Cut
Most Asian currencies moved in narrow ranges on Wednesday, while the U.S. dollar remained steady after recent gains. Traders focused on the Federal Reserve’s expected rate cut later in the day, a move that could shape global currency trends.
Market Eyes the Bank of Japan and Trump-Xi Meeting
Investors also turned their attention to the upcoming Bank of Japan (BOJ) rate decision, as well as a crucial meeting between President Donald Trump and Chinese President Xi Jinping scheduled for Thursday.
The Australian dollar stood out among its regional peers. The AUD/USD pair rose 0.2%, hitting a near three-week high after stronger-than-expected inflation data reduced expectations of further rate cuts by the Reserve Bank of Australia (RBA).
Regional Currencies Supported by Trade Hopes
In recent sessions, Asian currencies gained modest strength thanks to optimism around U.S.-China trade progress, which boosted risk appetite. Confidence in a Federal Reserve rate cut also supported regional exchange rates across Asia.
Dollar Firms Ahead of Fed Announcement
The U.S. dollar index and dollar futures edged slightly higher during Asian trading hours. Markets remained upbeat before the Fed meeting’s conclusion on Wednesday.
The Federal Reserve is widely expected to cut interest rates by 25 basis points, amid signs of easing inflation and slower job growth in the U.S. However, since the cut is largely priced in, traders are awaiting comments from Fed Chair Jerome Powell for hints on future policy direction.
Yen Stable as BOJ Decision Nears
The Japanese yen traded around 152 per dollar on Wednesday, showing little movement. Despite minor strength earlier in the week, the yen was still close to an eight-month low, as markets expected the BOJ to hold rates steady.
Analysts believe the central bank will maintain its current policy stance when it concludes its meeting on Thursday. The BOJ continues to face pressure from expectations of looser fiscal policy under Prime Minister Sanae Takaichi.
Takaichi’s recent election has weighed heavily on the yen, as investors predict increased government spending and opposition to further monetary tightening.
Trump-Xi Meeting in Focus Across Asia
Across broader Asian markets, currencies stayed mostly rangebound, with investors watching the Trump-Xi meeting in South Korea.
The Chinese yuan (USD/CNY) hovered near 7.1, after a sharp decline over the past month. Other currencies, including the Taiwan dollar (USD/TWD), remained flat. The Singapore dollar (USD/SGD) edged up 0.1%, and the South Korean won (USD/KRW) rose 0.2%.
Meanwhile, the Indian rupee (USD/INR) traded slightly higher, remaining above the 88-rupee mark.
The upcoming Trump-Xi meeting is expected to bring further de-escalation in the U.S.-China trade conflict. President Trump indicated he may consider reducing fentanyl-related tariffs on Chinese goods and will also discuss rare-earth elements and AI chip trade, including products from Nvidia.
