Dollar firm ahead of Fed meeting, Asian FX lower; yen weaker – Most Asian currencies remained within ranges on Wednesday, while the U.S. dollar traded near six-month highs as expectations for a Federal Reserve meeting kept traders largely in favor of the U.S. dollar.

The yen has weakened even as it rebounded sharply earlier this week on suspicion of government intervention.

A series of regional holidays including Labor Day in Asia also kept most regional currencies stalled.

Dollar near six-month high as interest rate concerns mount ahead of Fed meeting

Asian shares rose 0.2%, extending overnight gains as markets awaited the end of the two-day Federal Reserve meeting later on Wednesday.

The Fed is widely expected to. But Fed Chairman Jerome Powell is likely to offer a hawkish outlook on interest rates, especially after a series of higher-than-expected inflation data.

Higher-than-expected first-quarter data heightened concerns about sticky inflation and was the main driver of the dollar's gains on Tuesday.

The Fed is currently expected to start cutting interest rates in September this year, if at all. Powell is also expected to provide more clues on the direction of interest rates.

Yen weakens, USD/JPY gains despite suspected intervention

The pair, which measures the amount of yen required to buy one dollar, edged higher on Wednesday after rising sharply in overnight trading. The pair is hovering around 158, showing limited weakness following suspected Japanese government intervention earlier this week.

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USD/JPY fell as low as 155 on Monday before rebounding on Tuesday as the market remained unconvinced by the Bank of Japan's prospects for rising inflation.

The biggest pressure on the yen remains the prospect of higher U.S. interest rates and a stronger dollar in the longer term.

Other Asian currencies were weaker due to the Labor Day holiday and caution ahead of the Federal Reserve. The Australian dollar edged lower against the U.S. dollar as pressure on the U.S. dollar overshadowed speculation that the Reserve Bank of Australia might raise interest rates.

The Reserve Bank of Australia is likely to take a hawkish stance after first-quarter inflation data was stronger than expected.

The Indian rupee rose 0.1%, approaching a record high, and volatility in the rupee will continue during the 2024 election.

The offshore yuan fell slightly as some hoped China would take more stimulus measures.

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