Investing.com — Most Asian currencies were marginally lower on Wednesday, while the dollar held steady as traders retreated in the face of a barrage of signals on US interest rates from the Federal Reserve and headline inflation data.
Sentiment towards Asia was affected by fears of renewed trade tensions between the United States and China, after media reports said that the White House plans to impose stricter restrictions on chip sales to Russia, which could affect Chinese sellers.
China's mid-range inflation data also raised concerns about the country's sluggish economic recovery.
The Chinese yuan fell amid trade unrest and moderate inflation
The Chinese yuan pair hovered near six-month highs on Wednesday, as reports of increased US trade scrutiny weighed on sentiment. These reports come just weeks after the United States implemented increased tariffs on several key Chinese industries.
Mixed Chinese inflation data also raised some concerns about the country's economic recovery. While inflation contracted at its slowest pace in 15 months in May, inflation grew less than expected and remained barely outside deflationary territory.
The reading indicates that consumer spending – the main driver of the Chinese economy – remained weak, even as factory activity rebounded.
All of the broader Asian currencies were suffering from recent declines against the dollar, as uncertainty over US interest rates kept traders biased towards the greenback.
The Japanese Yen pair rose slightly and remained above the 157 yen level. The currency received little support from the hotter-than-expected reading, which came ahead of the Bank of Japan's meeting this week.
The Bank of Japan is scheduled to meet on Friday, and is likely to meet. But the central bank is also expected to tighten policy further by reducing the pace of bond purchases.
The Australian dollar pair rose 0.1%, while the South Korean won pair walked on water, as did the Singapore dollar pair.
The Indian rupee pair hovered near record levels, as recent volatility, in the wake of the surprise 2024 general election result, weakened the rupee.
The dollar fell due to the Fed meeting and CPI data
The euro index held near one-month highs on Wednesday, after rebounding in recent sessions in anticipation of Wednesday's signals.
The Fed is widely expected to take a more hawkish stance on the path of interest rates, citing recent firmness in inflation and strength in the labor market.
Ahead of the Fed's decision, data for May is scheduled for release on Wednesday. The reading is also expected to show that inflation remained steady in May, giving the Fed little incentive to start cutting interest rates.
The prospect of higher US interest rates weighed heavily on Asian markets over the past year.