Asia FX flat as dollar steadies on Powell comments; Kiwi sinks on dovish RBNZ By Investing.com

Most Asian currencies moved in a flat-to-low range on Wednesday as the dollar found some strength after Federal Reserve Chairman Jerome Powell offered no direct signals on interest rate cuts.

The New Zealand dollar was the worst performer of the day after the Reserve Bank of New Zealand struck a somewhat dovish tone at its meeting.

Dollar steady after Powell testimony; CPI expected to rise

The US dollar recovered from recent losses and steadied in Asian trading after Powell pointed to a slowdown in the labor market and progress towards reducing inflation.

But the Fed chair said any rate cuts would depend largely on data, and stressed the bank’s commitment to meeting its 2% inflation target.

Traders largely held onto their bets on a September rate cut after Powell’s comments — bets that have hurt the dollar in recent weeks. But the greenback found some support as Powell’s comments also highlighted upcoming inflation data.

The reading is due out on Thursday and is expected to show inflation held steady in June.

New Zealand Dollar Falls After RBNZ Turns Dovish

The New Zealand dollar fell on Wednesday, with the pair down 0.5%.

The losses in the New Zealand dollar came as the Reserve Bank of New Zealand reported progress in returning inflation to its annual range of 1% to 3%. The central bank also said it could ease monetary policy if it moves to ease inflation further.

This has seen traders increase bets that the Reserve Bank of New Zealand could cut interest rates at least once in 2024, especially if inflation slows more than expected.

Japanese Yen and Chinese Yuan Face Mixed Inflation

The Japanese yen remained fragile, with the pair rising 0.1% and returning to 38-year highs.

Japanese inflation data showed that although factory inflation rose in June, it remained relatively weak, raising doubts about whether the Bank of Japan will have enough momentum to continue tightening monetary policy.

The Chinese yuan was also weak, with the pair rising slightly towards its November highs.

China’s inflation rate contracted in June, reflecting weaker spending confidence among consumers, raising questions about the extent of the country’s already-underway economic recovery.

But inflation in China improved, contracting at its slowest pace since February 2023.

However, deflation in China has largely remained in place.

Broader Asian currencies were in a flat-to-low range as a stronger dollar weighed on regional markets. The Australian dollar rose 0.1%, while the South Korean won rose 0.2%. The Bank of Korea is due to meet on Thursday, and the central bank is likely to keep interest rates on hold.

The Singapore dollar pair did not witness significant movements, as happened with the Indian rupee pair.