Investing.com — Most Asian currencies moved little on Wednesday, while the dollar held steady as traders braced for a barrage of clues about U.S. Federal Reserve interest rates and key inflation data.
Sentiment towards Asia was hit by fears of renewed trade tensions between the US and China after media reports said the White House is planning tighter restrictions on chip sales to Russia, which could impact Chinese resellers.
Mediocre Chinese inflation rates also raised concerns about a slow economic recovery in the country.
The Chinese yuan fell due to trade frictions and moderate inflation
The Chinese yuan pair hovered close to a six-month high on Wednesday as reports of increased US trade investigations hurt sentiment. The reports come just weeks after the US imposed increased tariffs on several key Chinese industries.
Mixed Chinese inflation data also raised some concerns about an economic recovery in the country. While inflation contracted at the slowest pace in fifteen months in May, inflation grew less than expected and barely stayed out of contraction territory.
The figures showed that consumer spending – a key driver of the Chinese economy – remained weak even as factory activity picked up.
The broader Asian currencies all posted recent declines against the dollar as uncertainty over US interest rates kept traders favoring the greenback.
The Japanese yen pair rose slightly and remained well above 157 yen. The currency received little support from the warmer-than-expected , which came just before a Bank of Japan meeting this week.
The BOJ meets on Friday and likely will. But the central bank is also expected to tighten policy further by slowing the pace of bond purchases.
The Australian dollar pair rose 0.1%, while the South Korean won pair treaded water, as did the Singapore dollar pair.
The Indian rupee’s pair has been hovering close to record highs after recent volatility in the wake of a surprise result in the 2024 general elections hit the rupee.
Dollar Muted by Fed Meeting, CPI Data
The and remained near one-month highs on Wednesday after recovering in recent sessions ahead of Wednesday’s signals.
The Fed is widely expected to take a more aggressive stance on interest rate policy, citing the recent persistence of inflation and strength in the labor market.
Before the Fed’s decision, May figures will be released on Wednesday. Inflation is expected to continue in May, giving the Fed little incentive to cut interest rates.
The prospect of high US interest rates has put a lot of pressure on Asian markets over the past year.
