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Investing.com-- Most Asian currencies steadied on Wednesday after overnight losses, as the U.S. dollar firmed on stronger-than-expected inflation data, which highlighted the early impact of President Donald Trump’s trade tariffs.
The US Dollar Index, which measures the greenback against a basket of major currencies, jumped 0.6% overnight, pressuring regional currencies.
It was trading largely unchanged in Asia hours on Wednesday.
Fed rate outlook in focus after US June CPI rises
Data on Tuesday showed that the U.S. Consumer Price Index increased 0.3% last month after edging up 0.1% in May. That was the largest gain since January.
Core inflation rose at an annual rate of 2.9% in June, coming in just below the 3% consensus estimate but marking a slight acceleration from May.
"The details show that there was some scattered evidence of early tariff impacts on some goods components," ING analysts said in a note.
“A slightly softer-than-expected June core inflation reading keeps alive the chances of a September Federal Reserve interest rate cut, but the risk is that we get less benign prints for July and August,” they added.
Fed Chair Jerome Powell has previously said he expects tariffs to push inflation higher this summer, likely keeping the central bank on pause in the near term.
Investors were also cautious due to uncertainty around Powell’s job as President Trump and his allies amped up calls to remove Powell from his position.
Asia FX stabilizes after overnight losses
The Japanese yen led losses overnight, with the USD/JPY pair rising nearly 1%. It was largely unchanged on Wednesday.
The South Korean won’s USD/KRW edged 0.2% higher, extending overnight gains.
President Trump continued with his new tariff threats ahead of his Aug. 1 deadline. His recent action was against Indonesia, with plans to impose 19% duties.
Even though recent tariff threats have not had a large impact on broader market moves, traders have refrained from placing large bets amid uncertainty.
The Australian dollar’s AUD/USD ticked 0.2% higher after losing 0.5% in the previous session.
Both the onshore USD/CNY and offshore USD/CNH Chinese yuan pairs gained 0.1% on Wednesday.
The Indian rupee’s USD/INR pair and the Singapore dollar’s USD/SGD traded largely flat.