Investing.com — Most Asian currencies traded lower on Wednesday as the dollar pared more of its recent losses, while the Australian dollar was an outlier, as sticky inflation data strengthened the case for an aggressive reserve bank.
Still, the US dollar’s recovery was limited, as were losses in regional markets, as traders remained optimistic about a Federal Reserve rate cut in the coming month. Inflation data due later this week is expected to provide more evidence of a possible reduction.
Concerns about China also kept sentiment towards Asia tense after Canada imposed steep trade tariffs on the country’s electric car sector.
Australian dollar at near 8-month high on steady CPI
The Australian dollar was among the better performers in Asia, rising 0.1% to a nearly eight-month high after consumer price index data for July came in stronger than expected.
rose 3.5%, slightly exceeding expectations regarding high food prices, although subsidies on electricity costs helped reduce overall inflation.
The underlying CPI fell from 4% to 3.7%, but still remained well above the Reserve Bank of Australia’s target of 2% to 3%.
Wednesday’s reading led to more speculation about an aggressive RBA, in that persistent inflation will cause the central bank to keep interest rates high for longer, or even raise them further.
Analysts at ANZ said that while inflation rates were higher, it was still unlikely to change the RBA’s current trajectory.
The dollar rebounds from a 13-month low, PCE data was expected
The and rose 0.2% each in Asian trading, further recovering from a 13-month low earlier this week.
The dollar has been battered by a slew of dovish signals from Federal Reserve officials, prompting higher bets on a September rate cut.
Traders were divided between a 25 or 50 basis point cut, it emerged. Recent signs of a cooling US labor market have called for a bigger cut, and also led to speculation that the Fed could cut rates by as much as 100 basis points by the end of the year.
The focus this week is on numbers – the Fed’s favorite inflation gauge – for more insight into the central bank’s plans to cut interest rates.
Broader Asian currencies moved from flat to low. The Japanese yen pair rose 0.3% to 144.44 yen after falling to a low of 143.69 yen, with the currency receiving continued support from expectations of more rate hikes from the Bank of Japan. data due Friday will provide more clues.
The Chinese yuan pair rose 0.1% on continued concerns about a trade war with the West, after Canada joined the US and European Union in imposing trade tariffs on the EV sector. Beijing denounced the move and may roll out retaliatory measures.
The South Korean won pair rose 0.8%, while the Singapore dollar pair rose 0.2%.
The Indian rupee pair held steady after a brief test of the 84 rupee level, which was just below record highs.
