By Investing.com– Most Asian currencies kept to a tight range on Wednesday, while the dollar pulled back from over two-year highs as traders awaited key consumer inflation data that is likely to factor into the outlook for interest rates.
Focus remained on incoming U.S. President Donald Trump’s plans for more trade tariffs, while comments from several Federal Reserve officials were also on tap.
Traders were also awaiting an interest rate decision in China and labor market data from Australia- due in the coming days- for more cues on Asian markets.
The Chinese yuan’s USD/CNY pair hovered around a 16-month high, while the Australian dollar’s AUD/USD pair fell 0.2% and remained close to a five-year low.
Concerns over higher U.S. rates pressured most other Asian currencies. The Japanese yen’s USD/JPY pair was flat, taking little support from Bank of Japan comments that the central bank will debate raising interest rates when it meets next week.
The Singapore dollar’s USD/SGD pair rose 0.1%, while the Indian rupee’s USDINR pair rose slightly after hitting a record high of more than 86.6 rupees. Indian consumer inflation fell to a four-month low in December, data showed on Tuesday.
Dollar hovers below 2-yr high with CPI on tap
The dollar index and dollar index futures steadied in Asian trade after falling from a more-than two-year high in overnight trade.
Weakness in the dollar was driven largely by producer price index inflation data reading softer than expected for December. The reading spurred some hopes that inflation will ease and give the Fed more headroom to keep cutting interest rates.
But certain components of the PPI reading- which also factor into PCE price index data, the Fed’s preferred inflation gauge- read stronger for December, indicating that underlying inflation likely remained high.
Focus is now squarely on consumer price index inflation data, due later on Wednesday, for more cues on interest rates. The reading comes amid growing anxiety that sticky inflation will keep U.S. interest rates higher for longer, especially after the Fed warned of a slower pace of rate cuts this year.
Focus was also on Trump’s plans for trade tariffs, which central bank members warned could underpin inflation in the long term. Reports this week showed Trump’s team was considering a plan for gradual tariff increases.
South Korean won steady after President Yoon’s arrest
The South Korean won’s USD/KRW pair was steady after local media reports said impeached President Yoon Suk Yeol was arrested over a failed attempt to impose military law in December.
Authorities apprehended Yoon at the Presidential compound in their second attempt this month to arrest the President, who will now be tried for insurrection.
Yoon’s arrest marks a potential end to heightened political uncertainty in South Korea after his impeachment in early-December. The won had slumped to its weakest level since 2009 amid heightened political uncertainty.
