Investing.com-- Most Asian currencies were largely muted on Wednesday ahead of the U.S. Federal Reserve’s interest rate decision due later in the day, while the Bank of Japan kept rates unchanged as expected.
Meanwhile, bucking the regional trend, the Indonesian rupiah fell sharply ahead of the Bank Indonesia interest rate decision due later on Wednesday.
The US Dollar Index was largely steady at 103.29 in Asian trading as of 03:13 GMT, remaining slightly above a five-month low it reached last week.
BOJ keeps rate unchanged as expected, yen muted
The Bank of Japan (BOJ) maintained its short-term interest rate at 0.5% on Wednesday, aligning with market expectations.
This decision reflects the central bank’s cautious approach amid global economic uncertainties, including potential impacts from rising U.S. tariffs.
The Japanese yen’s USD/JPY was unchanged at 149.32 yen, as the decision was largely priced in.
BOJ Governor Kazuo Ueda is scheduled to provide further insights into the bank’s policy considerations at a press conference later today.
Japan’s inflation rate has been on an upward trajectory, reaching 4.0% in January 2025, the highest since January 2023. Concurrently, nominal wages increased by 2.8% year-on-year in January.
The central bank said it expects underlying consumer inflation to increase gradually in the coming months.
This could motivate the BOJ to further hike rates, after its recent one in January.
Fed rate decision looms, investors seek clarity on Trump tariffs
The Federal Reserve’s two-day policy meeting started overnight, where the central bank is expected to hold interest rates unchanged at the end of the meeting on Wednesday.
Investors will closely scrutinize the Fed’s commentary on recent trade policies, including tariffs imposed by the Trump administration, which have heightened fears of a potential recession.
Investors were cautious, leading to muted moves in the region.
The Chinese yuan’s onshore USD/CNY pair was largely unchanged, while the offshore USD/CNH pair inched up 0.1%.
The South Korean won’s USD/KRW ticked up 0.2%, while the Singapore dollar’s USD/SGD was unchanged.
The Australian dollar’s AUD/USD pair was also steady.
The Indian rupee’s USD/INR pair gained 0.2%.
Rupiah slips despite central bank intervention, BI rate decision awaited
The Indonesian rupiah’s USD/IDR pair jumped 0.7%, and has gained nearly 1.2% this week.
A Reuters report showed that Indonesia’s central bank has intervened in currency markets, including spot forex, non-deliverable forward, and bond markets.
A Bank Indonesia (BI) official told Reuters the rupiah was affected by global factors and spillover from Tuesday’s stock index decline.
The BI is expected to keep interest rates unchanged on Wednesday to shield the rupiah from further declines amid rising global trade tensions.