Investing.com — Most Asian currencies moved within a tight range on Wednesday as traders digested a recent round of stimulus from China, while the dollar hovered around two-month highs on bets on smaller interest rate cuts.
Regional currencies have suffered some losses over the past two weeks as signs of resilience in the US economy fueled expectations that the Federal Reserve will cut interest rates less than expected. This idea boosted the dollar.
Doubts about China also limited sentiment towards Asia after Beijing failed to provide key details while discussing plans for more stimulus.
Dollar nears two-month high on bets on smaller rate cuts
Asian trading fell slightly, remaining near a two-month high earlier this week.
The dollar was supported by growing expectations that the resilience of the US economy will lead to a slower pace of Fed rate cuts. Recent readings of U.S. consumer inflation and the labor market have furthered this idea.
Traders were pricing in a 94.1% chance that the Fed will cut rates by 25 basis points in November, smaller than the 50 basis point cut shown in September. Traders also factored in a small chance that rates would remain unchanged.
Speeches from several Fed officials this week showed policymakers were cautious about future rate cuts. Figures due later this week are expected to provide more clues about the US economy.
The prospect of relatively high interest rates led most Asian currencies to losses in the past two weeks. Regional units were also muted on Wednesday.
The Japanese yen pair fell slightly, but remained within sight of 150 yen. Consumer inflation data due later this week is expected to provide more clues to the Bank of Japan’s plans to raise interest rates further.
The South Korean won pair fell 0.3%, while the Singapore dollar pair fell 0.1%. The Indian rupee pair fell slightly but remained close to recent record highs.
The Chinese yuan fell on doubts about the stimulus measures
The Chinese yuan pair moved little on Wednesday but suffered losses this week as sentiment soured on the country’s plans for more stimulus.
China’s Finance Ministry said it will take a raft of fiscal measures to boost growth. But the Defense Ministry did not specify the timing or extent of the planned measures, prompting limited optimism about the planned move.
Weak economic data from China also increased the need for more extensive measures.
Doubts over China sent the Australian dollar pair down 0.2% given the currency’s high trading exposure to the mainland.