Investing.com — Most Asian currencies remained range-bound on Wednesday, while the dollar stabilized in anticipation of further signals from the Federal Reserve and US inflation on the path to interest rates.
The New Zealand dollar lagged behind its peers, falling sharply after the Reserve Bank of New Zealand cut interest rates and took a dovish tone.
Sentiment towards regional currencies faltered due to declining optimism about further stimulus measures in China, as the government provided few details on its plans to implement further economic support. The yuan also suffered sharp losses from the previous session.
Dollar steady with Fed minutes, inflation on hand
The US dollar index moved slightly in Asian trading, settling near the seven-week high recorded on Monday.
The dollar’s gains came after strong employment data raised doubts about the strength of the Federal Reserve’s momentum to continue sharply cutting interest rates. Traders saw an 83.2% chance that the Fed would cut interest rates by 25 basis points in November, with interest rates remaining unchanged at 16.8%.
The Fed’s September meeting – where the central bank cut interest rates by 50 basis points – is scheduled for later on Wednesday, offering further signals about its plans.
September inflation data is due later this week, and is also likely to take into account the Fed’s forecasts.
The New Zealand dollar weakens after the Reserve Bank of New Zealand’s interest rate cut
The New Zealand dollar pair fell 1% on Wednesday after the Reserve Bank of New Zealand adopted a dovish tone.
The 50 basis point cut was at the high end of market expectations, with the bank citing declining inflation and economic growth as its drivers.
Wednesday’s cut is also the RBNZ’s second cut this year, with the central bank giving mixed signals on whether interest rates will fall further.
The Chinese yuan stabilizes after sharp losses. Motivational joy is diminished
The Chinese yuan fell slightly on Wednesday, with the pair rising 0.1%. The pair rose by 0.6% in the previous session, as internal trading resumed after the Golden Week holiday.
Sentiment towards China has been put on the back burner by Beijing providing few details on how it plans to implement its recently unveiled stimulus measures – which include interest rate cuts and more liquidity support.
But lower interest rates also represent more headwinds for the yuan.
Broader Asian currencies maintained a narrow range, while commodity-linked units, such as the Australian dollar, weakened on concerns about China. The pair fell by 0.2%.
The Japanese yen pair moved slightly after falling significantly against the dollar over the past week.
The Indian rupee pair is hovering near pre-record levels, as the central bank is widely expected to keep interest rates steady.