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Investing.com-- Most Asian currencies moved in a tight range on Thursday as markets looked to upcoming U.S.-China trade talks for more cues, while strength in the dollar also weighed after the Federal Reserve kept interest rates steady.
Regional markets took few positive cues from U.S. President Donald Trump stating that he will announce a “major” trade deal on Thursday, after a report suggested that the deal will be with Britain.
Overnight strength in the dollar presented a weak lead-in for most Asian currencies, after the Fed kept rates steady and flagged no plans to lower rates in the near-term.
Regional sentiment was also quashed by heightened military tensions between India and Pakistan, as the two nuclear armed countries engaged in their worst fighting in years.
Dollar inches lower after strong gains on Fed; Trump flags trade deal
The dollar index and dollar index futures fell marginally in Asian trade after logging strong overnight gains on the Fed.
The central bank signaled no hurry to cut interest rates, amid heightened uncertainty over trade, the economy, and inflation. Fed Chair Jerome Powell also reiterated the bank’s wait-and-see approach towards rates.
Sentiment towards the U.S. was little improved by Trump stating that he will announce a major trade deal later on Thursday, after a report said the deal will be with the UK.
The UK is not subject to Trump’s plans for steep reciprocal tariffs, given that it has a trade deficit with Washington.
While a U.S.-UK trade deal still stands to benefit both countries, its economic ramifications are likely to be far less pronounced than a trade deal with other, larger economies- especially Japan, the European Union, and China.
Chinese yuan muted with US trade negotiations in focus
The Chinese yuan weakened slightly on Thursday, with the USDCNY pair rising 0.1%. The currency had taken limited support from Washington and Beijing confirming that officials will meet for trade talks in Switzerland this week.
Markets see a U.S.-China trade deal as unlikely in the near-term, especially as Beijing reiterated that no major negotiations will take place until the U.S. lowers its steep trade tariffs on the country. Trump said he had no plans to do so ahead of talks this week.
Other Asian currencies were muted amid little optimism over trade and economic growth.
The Japanese yen’s USDJPY pair fell 0.2%, as the currency recouped some of its recent losses. Japanese wage data for March is due on Friday and is widely expected to factor into the Bank of Japan’s plans for interest rates.
The Australian dollar’s AUDUSD pair rose 0.5%, recovering from a nearly 1% slide on Wednesday.
The South Korean won’s USDKRW pair fell 0.2%, while the Singapore dollar’s USDSGD pair was flat.
The Indian rupee’s USDINR pair fell 0.2% after rising sharply in the prior session on heightened tensions with Pakistan. India struck several alleged terrorist sites in Pakistan, drawing retaliatory shelling from Islamabad in the Kashmir border region.
The Taiwan dollar’s USDTWD pair fell 0.5%, after an unwinding in local dollar positions sparked wild swings in the currency over the past week. Taiwan is expected to benefit from a U.S.-China trade deal, and is also in dialogue with the U.S. over tariff exemptions.