Asia FX, dollar subdued ahead US CPI; Japan inflation, PMI in focus

Investing.com-- Asian currencies and the dollar were little changed on Friday as investors stayed on the sidelines ahead of the release of U.S. consumer price data, while they digested fresh Japanese inflation and factory activity readings.

The US Dollar Index, which measures the greenback against a basket of major currencies, ticked up 0.1%, set to gain 0.6% for the week. US Dollar Index Futures also traded 0.1% higher as of 04:58 GMT.

US CPI on tap, Trump to meet Xi next week

The U.S. consumer price index report, postponed earlier this month due to an ongoing government shutdown, is due later on Friday and is expected to play a key role in shaping expectations for next week’s Federal Reserve policy meeting.

Markets widely anticipate the Fed will deliver a 25-basis-point rate cut due to a cooling labor market.

"Consensus expects headline prices to rise around 0.4% MoM and the core measure to rise around 0.3%," ING analysts said in a note.

"Tariffs may start to become a little more obvious but given the Fed’s primary worry right now is a cooling in the jobs market, this won’t block a 25bp rate cut later this month," they added.

Investors were reluctant to make big moves before the data, keeping most Asian currencies in tight ranges. 

In China, the yuan’s onshore pair USD/CNY was little changed, while the offshore pair USD/CNH ticked 0.1% higher 

The South Korean won’s USD/KRW  gained 0.1%, while the Singapore dollar’s USD/SGD also traded marginally higher.

The Indian rupee’s USD/INR ticked 0.1% lower. The Australian dollar’s AUD/USD pair edged down 0.2%.

Meanwhile, the White House said U.S. President Donald Trump will meet Chinese President Xi Jinping on the sidelines of events in Seoul, raising hopes for progress in U.S.-China trade relations.

Japan Sept CPI accelerates; Oct PMI data shows weakness 

Data on Friday showed that Japan’s core consumer inflation rose 2.9% in September from a year earlier, while the broader “core-core” measure -- which excludes both food and energy -- climbed 3.0%.

The readings remain above the Bank of Japan’s 2% target, fueling expectations that policymakers may further discuss an eventual tightening.

In other news, Japan’s factory activity for October slipped to its weakest level in 19 months, signaling continued contraction in factory output. The services PMI also eased, but remained strong amid robust domestic demand.

"Japan’s core inflation remaining above 3% is likely to support the Bank of Japan’s policy normalisation efforts. Although a split vote may occur at the October meeting, it is unlikely to prevail," ING analysts said in a separate note.

"We now consider a December rate hike a more likely scenario," they added.