Asian currencies and the U.S. dollar were largely unchanged on Wednesday after Federal Reserve Chair Jerome Powell struck a cautious tone regarding future rate cuts, while the Australian dollar gained after hot consumer inflation data raised concerns about future RBA cuts.
The US Dollar Index, which measures the greenback against a basket of major currencies, rose 0.1%, holding steady after it failed to extend its rebound beyond pre-Fed decision levels.
US Dollar Index Futures also traded 0.1% higher as of 03:46 GMT.
Powell signals caution on future rate cuts
Fed Chair Jerome Powell emphasized the challenges of balancing inflation control with employment risks in his speech on Tuesday. He highlighted the absence of a "risk-free path" as the Fed navigates persistent inflation and weakening job growth.
Following Powell’s remarks, Federal Reserve Bank of Chicago President Austan Goolsbee stated that the Fed has room to lower interest rates if inflation continues to decline. However, he cautioned against aggressive cuts due to persistent inflationary risks.
Markets are pricing in two more rate cuts this year, in line with the central bank’s guidance.
Powell refrained from providing clear signals on the timing of the next rate cut, leaving markets uncertain about the Fed’s future policy direction.
The Japanese yen’s USD/JPY pair ticked up 0.1%, while the South Korean won’s USD/KRW traded flat.
The Singapore dollar’s USD/SGD pair also edged up 0.1%, while the Indian rupee’s USD/INR was largely unchanged.
In China, both the yuan’s onshore USD/CNY and the offshore pair USD/CNH rose 0.1%.
Traders also remain watchful of Friday’s U.S. core Personal Consumption Expenditures (PCE) inflation report, which is the Fed’s preferred gauge.
Aussie dollar gains on hot CPI; RBNZ names new governor
Australia’s consumer price index (CPI) rose 3.0% year-over-year in August, the fastest pace in a year and slightly exceeding forecasts of 2.9%.
The Reserve Bank of Australia reduced interest rates in its last meeting and signaled more cuts if the incoming data supported the move. Its next policy meeting is scheduled for September 29-30.
Markets widely expect the central bank to keep the cash rate unchanged at 3.6%, before easing it again in November.
However, Wednesday’s data showed inflation reaching the top of the RBA’s target range, stoking concerns around future central bank moves.
Despite this headline gain, core inflation, as measured by the trimmed mean, eased to 2.6% from 2.7% in July.
The Australian dollar’s AUD/USD pair rose 0.4% on Wednesday.
Meanwhile, New Zealand appointed Anna Breman as the new Governor of the Reserve Bank of New Zealand (RBNZ), effective Dec. 1.
Breman, 49, becomes the first woman and first foreign national to lead the central bank. She previously served as First Deputy Governor of Sweden’s Riksbank.
The New Zealand dollar’s NZD/USD pair traded largely flat.
Source :
https://www.investing.com/news/forex-news/asia-fx-steady-after-powells-cautious-stance-aussie-dollar-gains-on-hot-cpi-4252368
