Investing.com–Most Asian currencies moved from flat to low on Wednesday as the dollar found some strength after Federal Reserve Chairman Jerome Powell gave no immediate indication of rate cuts.
The New Zealand dollar was the worst performer of the day after the Reserve Bank of New Zealand struck a somewhat dovish tone at its meeting.
Dollar Holds Stable After Powell Testimony; CPI waited
The economy continued to recover from recent losses and Asian trading stabilized after Powell signaled cooling in the labor market and progress toward curbing inflation.
But the Fed chairman said any rate cuts will depend largely on data, and reiterated the Fed’s pledge to meet its 2% inflation target.
Traders largely maintained their bets on a September rate cut after Powell’s comments – bets that had hit the dollar in recent weeks. But the dollar found some support as Powell’s comments also put upcoming inflation data into clear focus.
The result is expected on Thursday and is expected to show that inflation remained stable in June.
Kiwi sinks as RBNZ strikes a forgiving deal
The New Zealand dollar weakened on Wednesday, with the pair falling 0.5%.
The Kiwi losses came as the RBNZ made progress in reducing inflation to the annual range of 1% to 3%. The central bank also said it may ease policy on further easing inflation.
This caused traders to increase bets that the RBNZ could cut rates at least once in 2024, especially if inflation cools more than expected.
The Japanese yen and Chinese yuan are struggling with mixed inflation
The Japanese yen remained vulnerable, with the pair up 0.1% and back within sight of recent 38-year highs.
Japanese inflation data showed that while factory inflation picked up in June, it still remained relatively weak, raising doubts about whether the Bank of Japan will have enough impetus to maintain the tightening policy.
The Chinese yuan was also weak, with the pair rising slightly to highs last seen in November.
Chinese inflation contracted in June, reflecting weak consumer confidence to spend. This raised questions about the extent to which economic recovery was actually underway in the country.
But Chinese inflation improved and fell at the slowest pace since February 2023.
Yet Chinese disinflation largely continued to play a role.
Broader Asian currencies moved from flat to low as dollar strength pressured regional markets. The Australian dollar pair rose 0.1%, while the South Korean won pair rose 0.2%. A Bank of Korea meeting will follow on Thursday, with the BOK likely to leave interest rates unchanged.
The Singapore dollar pair moved little, as did the Indian rupee pair.
