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Investing.com-- Most Asian currencies kept to a tight range on Thursday as traders digested mixed signals from the Federal Reserve, while caution around a Bank of Japan meeting also weighed.
Focus was also squarely on a meeting between U.S. President Donald Trump and Chinese President Xi Jinping, which is likely to define trade relations between the two economic giants.
The dollar fell in Asian trade, facing some profit-taking after rising sharply in overnight trade. While the Fed did cut rates as expected, it also downplayed expectations of a December rate cut, amid increased caution over the U.S. economy.
Chinese yuan hits near 1-yr high as Trump and Xi meet in South Korea
The Chinese yuan’s USDCNY pair fell slightly to 7.0973 yuan, following another strong midpoint fix from the People’s Bank. The yuan touched its strongest level since November 2024.
Trump and Xi commenced their meeting in South Korea on Thursday, with reports from Chinese media showing some positive rhetoric between the two world leaders.
The two are expected to hash out a trade deal and help settle heightened trade tensions between the world’s largest economies, following an escalation earlier in October. Key points of contention include China’s rare earth export controls, and U.S. chip controls.
The yuan had firmed past increased U.S.-China trade tensions, being supported chiefly by the PBOC as it sought to boost exports with a stronger yuan. Pledges of more stimulus from Chinese officials also helped sentiment.
Japanese yen nurses losses with BOJ on tap
The Japanese yen’s USD/JPY pair fell 0.3% on Thursday, but was nursing a sharp rise from the overnight session.
The BOJ is widely expected to leave interest rates unchanged, with focus chiefly on the bank’s outlook on the Japanese economy.
The yen had weakened in the run-up to the BOJ meeting, as fiscal dove Sanae Takaichi’s election as prime minister ramped up bets on looser monetary conditions in the coming years.
The BOJ is also expected to face political resistance towards raising interest rates further, with Governor Kazuo Ueda widely expected to address Japan’s shifting economic climate.
Dollar dips as markets digest Fed moves
The dollar index and dollar index futures fell about 0.2% in Asian trade, after rallying nearly 0.6% each overnight.
The greenback was boosted chiefly by the Fed signaling doubts over a December interest rate cut, amid increased uncertainty over the economy, especially amid a prolonged government shutdown.
The Fed cut rates by 25 basis points as widely expected, although the move was largely priced in by markets. An outlook for fewer rate cuts now presents more uncertainty over U.S. monetary policy.
Broader Asian currencies were mostly muted on this notion. The Singapore dollar’s USD/SGD pair fell 0.1%, while the Taiwan dollar’s USD/TWD pair rose 0.1%.
The South Korean won’s USD/KRW pair fell 0.4%, with the won supported by Washington and Seoul signing a broader trade deal.
The Australian dollar’s AUD/USD pair rose 0.3%, extending gains after a hot consumer inflation reading wiped out bets on more rate cuts by the Reserve Bank.
The Indian rupee’s USD/INR pair moved little, but remained above 88 rupees and close to record highs.