Investing.com — Most Asian currencies stayed within a tight range on Wednesday, while the dollar closed near a six-month high, as anticipation of a Federal Reserve meeting left traders largely favoring the greenback .
This weakened the Japanese yen, even after suspected government intervention led to a sharp recovery in the currency earlier this week.
A slew of regional holidays in Asia, marking Labor Day, also left most regional currencies treading water.
Dollar nears six-month high as interest rate fears rise ahead of Fed meeting
Trading in Asia rose 0.2%, extending overnight gains as markets awaited the conclusion of a two-day Fed meeting later on Wednesday.
It is widely expected that the Fed will do this. But Fed Chairman Jerome Powell is likely to take a hawkish view on rates, especially after a slew of higher-than-expected inflation data.
A higher-than-expected first-quarter outcome added to concerns about persistent inflation and was a key driver of the dollar’s rise on Tuesday.
The Fed is not expected to start cutting rates until September of this year, if at all. Powell is also expected to provide more guidance on interest rates.
Japanese Yen Weakens, USDJPY Rises Despite Suspected Intervention
The pair, which measures the amount of yen needed to buy one dollar, rose slightly on Wednesday after sharp gains in overnight trading. The pair has been hovering around 158 after seeing limited weakness following a suspected intervention by the Japanese government earlier this week.
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The USDJPY pair fell to 155 on Monday before bouncing back on Tuesday as markets remained unconvinced of the Bank of Japan’s prospects for higher inflation.
The biggest point of pressure on the yen remained the prospect of longer US yields and a stronger dollar.
Other Asian currencies remained dovish amid a mix of Labor Day holidays and caution toward the Fed. The Australian dollar pair fell slightly as pressure on the dollar outweighed growing speculation about more potential rate hikes by the Reserve Bank of Australia.
The RBA is set at , and could potentially take a hawkish stance following stronger-than-expected inflation for the first quarter.
The Indian rupee pair rose 0.1% and was close to record highs, while the rupee’s volatility is set to continue through the 2024 general elections.
The Chinese yuan’s offshore pair fell slightly on some hopes of more stimulus measures in the country.
