© Reuters.
Investing.com – Most Asian currencies rose on Wednesday, while the dollar extended recent losses as markets waited for more clues about where US interest rates might peak, while focus also turned to upcoming inflation data.
Comments from Federal Reserve officials this week indicated that the central bank was close to peaking interest rates in the current rate hike cycle. This sparked sharp capital outflows from the dollar into risk-based assets, amid bets that the dollar had run its course.
The dollar extended its losses overnight in the Asian session, with the greenback falling 0.3% to a two-month low.
Dollar weakness, coupled with easing concerns from the Federal Reserve, led to strong gains in most Asian currencies, which also helped them recover from recent losses against the greenback.
The index rose 0.6 percent to the highest level in a month against the dollar, shrugging off a series of weak economic readings, while it jumped 0.5 percent. The two were the best performers in the region for the day.
The interest rate-sensitive index added 0.1%, with focus also shifting to what’s coming this week, while rising 0.2% ahead of domestic inflation (CPI) data due later in the day.
The Chinese Yuan rose amid talk of stimulus
It added 0.3% on Wednesday, hitting a three-week high for the dollar after a series of aggressive daily midpoint fixes by the People’s Bank of China.
The yuan has also been supported by an improving outlook for the Chinese economy, after state media sources reported that Beijing is considering more stimulus measures to support a slowing post-COVID economic recovery.
While the Chinese economy is likely to benefit from more spending measures, the yuan could face fresh headwinds from increased liquidity and inflation in the country, as well as potential further interest rate cuts by the People’s Bank of China.
The Chinese currency fell to a six-month low against the dollar in June.
US consumer price index, the Federal Reserve in focus
Markets were generally focused on the upcoming US, which is expected to show that overall inflation eased in June. But it is expected to remain flat, which in turn could lead to further rate hikes by the Fed in the near term.
And while Fed officials said the peak in US interest rates was near, they also unanimously agreed that more rate hikes were needed in the near term to quell flat inflation.
The Fed is widely expected at its late July meeting.
