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Investing.com-- Most Asian currencies kept to a tight range on Wednesday, while the dollar steadied after recent gains as markets looked to a widely awaited interest rate cut by the Federal Reserve later in the day.
Focus was also on an upcoming Bank of Japan rate decision, as well as a meeting between U.S. President Donald Trump and Chinese President Xi Jinping on Thursday.
The Australian dollar was an outlier, with the AUD/USD pair rising 0.2% to a near three-week high after hotter-than-expected consumer inflation data wiped out expectations for more interest rate cuts by the Reserve Bank.
Asian currencies logged some strength in recent sessions, as reports of progress in U.S.-China trade relations helped support risk appetite. Growing conviction in a Fed rate cut also aided regional currencies.
Dollar steady ahead of Fed meeting
The dollar index and dollar index futures rose slightly in Asian trade, remaining upbeat before the conclusion of a Fed meeting on Wednesday.
The central bank is widely expected to cut interest rates by another 25 basis points, amid signs of cooling U.S. inflation and labor market growth.
But with the 25 bps cut largely priced in, traders will be looking to commentary from Fed Chair Jerome Powell for more cues on rates.
Yen nurses losses as BOJ rate decision looms
The Japanese yen moved little on Wednesday, with the USD/JPY pair hovering around 152 yen.
While the yen saw some strength this week, it was nursing a tumble to its weakest levels in eight months, amid growing conviction that the BOJ will not hike rates in the near-term.
The BOJ is widely expected to leave rates unchanged at the conclusion of a meeting on Thursday, especially as it grapples with bets on looser Japanese fiscal policy under Prime Minister Sanae Takaichi.
Takaichi’s election earlier this month was a major weight on the yen, as markets bet that the conservative politician will ramp up fiscal spending and oppose more monetary tightening by the BOJ.
Asian markets await Trump-Xi meeting
Broader Asian currencies were largely rangebound, with focus also on an upcoming meeting between Trump and Xi. The two will meet in South Korea on Thursday.
The Chinese yuan’s USD/CNY pair hovered around 7.1 yen after falling sharply over the past month. The Taiwan dollar’s USD/TWD was also flat.
The Singapore dollar’s USD/SGD pair rose 0.1%, while the South Korean won’s USD/KRW pair rose 0.2%.
The Indian rupee’s USD/INR pair rose slightly after rising back above the 88 rupee level this week.
The Trump-Xi meeting is expected to yield further deescalation in a trade conflict between the world’s largest economies.
Trump told reporters on Wednesday that he was open to lowering his fentanyl-related tariffs on China during the meeting, and will also discuss rare earths and artificial intelligence chips, specifically those of Nvidia, during the meeting.