Investing.com — Most Asian currencies rose slightly on Wednesday as continued bets on rate cuts dented the dollar, while China’s yuan hit a 16-month high on optimism about more stimulus.
The Australian dollar and New Zealand dollar both posted strong gains thanks to their exposure to China, while the Japanese yen held steady after slightly stronger appreciation in producer inflation.
Regional currencies remained largely bullish after the Federal Reserve cut rates last week and signaled the start of an easing cycle that is widely expected to spur more capital flows into Asia.
The and fell 0.2% each in Asian trading, with focus shifting to an upcoming address against , with data due later in the week.
Chinese Yuan at 16-Month High After Stimulus Measures
The Chinese yuan was the best performer among its peers this week, with the pair falling 0.2% to its lowest level since May 2023.
The yuan rose after Beijing announced a raft of stimulus measures on Tuesday, including a cut in banks’ reserve requirements and lower mortgage rates.
These measures raised hopes for a Chinese economic recovery, with increased liquidity expected to help offset a deflationary trend in the country.
But analysts said more measures, mainly focused on fiscal measures, were needed to support the Chinese economy.
Australian dollar steady amid mixed CPI and aggressive RBA
The Australian dollar pair remained just below a 19-month high on Wednesday after a sharp rally in the previous session on Chinese momentum and an aggressive Reserve Bank.
Data released on Wednesday showed inflation fell to a three-year low in August, while the decline in core inflation was less pronounced.
Still, the drop in inflation was largely driven by government programs introduced earlier this year to curb high electricity prices.
The RBA remained steady on Tuesday, saying that while inflation was expected to fall in the near term, it only expected price pressures to sustainably reach their target range by 2026.
Governor Michele Bullock took a slightly less aggressive stance when he spoke on Tuesday after the RBA’s decision. But she said the central bank has no plans to cut interest rates in the short term.
The New Zealand dollar pair remained near its strongest levels of the year.
The broader Asian currencies were somewhat mixed. The Japanese yen pair held steady at 143.3 yen after business services price indices came in slightly higher than expected for August, indicating producer prices were rising.
The Singapore dollar pair fell slightly, while the South Korean won pair rose 0.3%.
The Indian rupee pair fell 0.1% as it continued its recovery from record highs reached earlier in September.