Investing.com — Most Asian currencies rose Wednesday ahead of more signals of rate cuts from the Federal Reserve, while the Japanese yen was volatile after mixed signals from the Bank of Japan.
The Australian dollar was an exception among its regional peers, with the currency sliding to a three-month low after data showed inflation in the core consumer price index eased slightly, reducing the prospect of rate hikes by the Reserve Bank of Australia.
Yen Volatile, USDJPY Fluctuates on Mixed BOJ Signals
The Japanese yen was volatile with the pair hovering in a range of 0.3% around 0% after the BOJ struck a mixed deal at its meeting.
The central bank raised its interest rate by 15 basis points to around 0.25% – the highest level of market expectations.
But the BOJ also said it will only halve the pace of Japanese government bond purchases from 6 trillion yen in the first quarter of 2026 to 3 trillion yen ($19.5 billion). The BOJ will reduce its purchases of Japanese government bonds by 400 billion yen every quarter.
Members of the BOJ also cut their growth and inflation forecasts for the 2024 fiscal year, raising uncertainty about how much room the central bank had to tighten policy.
Still, the yen continued to rise strongly in July as a mix of tapering carry trades and suspected government intervention led to buying in the currency.
Dollar falls by Fed, interest rate cuts in focus
Shares and prices fell 0.2% each in Asian trading, with some volatility seen this week as traders positioned for a Fed later on Wednesday.
It is widely expected that the central bank will leave interest rates unchanged. But any signals of plans to cut rates will be closely watched, especially in the wake of some soft inflation data and dovish comments from Fed officials.
The general consensus calls for a cut of 25 basis points in September.
The focus this week is also on the most important data, which will be released on Friday.
The Australian dollar is falling, AUDUSD is at a three-month low on soft inflation
The Australian dollar was the worst performer in Asia, with the pair falling 0.5% to its weakest level in three months.
The Aussie’s decline was mainly driven by some soft CPI data for the June quarter. While overall growth in the quarter grew as expected, the lower figures reinforced hopes that inflation will ease in coming months, reducing the need for a rate hike by the RBA.
Broader Asian currencies firmed, monitoring dollar weakness. The Chinese yuan pair fell 0.2% as soft data and positive government comments raised expectations for more stimulus measures in the country.
The South Korean won pair fell 0.3%, while the Singapore dollar pair moved sideways.
The Indian rupee’s pair hovered around a record high of 83.8, seeing little relief from a softer dollar.
