Investing.com — Most Asian currencies fell on Wednesday, while the dollar rose on comments from Federal Reserve officials that made markets rethink their expectations for a U.S. interest rate cut.
The Japanese yen's performance remained weak among its peers, falling against the dollar even as government officials continued their warnings about possible further intervention in currency markets.
The Australian dollar also continued to underperform after the Reserve Bank of Australia took a less hawkish stance than expected on Tuesday.
Japanese yen weakens, USDJPY rises despite threats of intervention
The Japanese yen pair – the inverse of the yen's strength – rose 0.3% and crossed the 155 level, returning towards the 34-year high of over 160 yen reached last week.
The pair fell from those levels after the Japanese government appeared to intervene in the currency markets on two separate occasions, while some weakness in the dollar also helped the yen.
But with markets now skeptical about expectations of a US interest rate cut, traders have resumed their speculation against the yen, even as Japanese officials warn of continued weakness in the currency.
The Australian dollar continues its losses after a less hawkish Reserve Bank of Australia
The Australian dollar pair fell 0.4% on Wednesday, extending sharp declines from the previous session after the Reserve Bank of Australia took a less hawkish tone than traders expected.
While the RBA warned that inflation would remain steady in the coming months, it stopped short of threatening to raise interest rates further – a scenario that had been priced into the Australian dollar in the run-up to the meeting.
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While the Reserve Bank of Australia also indicated interest rates will remain high for longer, markets responded to expectations of a rate hike from the Australian dollar, which reached its highest level in almost two months ahead of Tuesday's meeting.
However, losses in the Australian dollar are expected to be limited as interest rates remain near 12-year highs, possibly for the rest of 2024.
The dollar strengthens as Fed officials cool interest rate cut bets
The US dollar index rose 0.1% in Asian trading, extending its gains overnight after a large number of Federal Reserve officials warned that US interest rates are likely to remain unchanged for the rest of the year.
While weaker-than-expected data released last week prompted some bets on a rate cut in September, a slew of Fed officials warned this week that steady inflation would likely give the bank more reason to hold interest rates steady.
This rhetoric has strengthened the dollar and affected most risk-driven assets, with Asian currencies seeing continued weakness.
The Chinese yuan pair rose 0.1 percent as markets awaited April trade data scheduled for Thursday for more signals about Asia's largest economy.
The South Korean won pair jumped by 0.5%, while the Singapore dollar pair rose by 0.1%.
The Indian Rupee pair remained within sight of record highs above 83.5, with the currency expected to witness increased volatility amid the 2024 general elections.