Most Asian currencies rose slightly on Wednesday as the dollar was hurt by continued bets on interest rate cuts, while China’s yuan hit a 16-month high on optimism about more stimulus measures.
The Australian and New Zealand dollars made strong gains thanks to their exposure to China, while the Japanese yen steadied after a slightly stronger reading on producer inflation.
Regional currencies remained largely upbeat after the Federal Reserve cut interest rates last week and announced the start of an easing cycle that is widely expected to lead to more capital flows to Asia.
Gold and silver prices fell 0.2% each in Asian trading, with focus shifting to a closely-watched speech and data due later in the week.
Chinese Yuan Hits 16-Month High on Stimulus
The Chinese yuan was the best performer among its peers this week, with the pair falling 0.2% to its lowest level since May 2023.
The yuan rose after Beijing announced a series of stimulus measures on Tuesday, including lowering reserve requirements for banks, as well as cutting mortgage rates.
These moves have raised hopes for a recovery in the Chinese economy, as increased liquidity is expected to help offset the country’s deflationary trend.
But analysts said more measures, especially targeted fiscal steps, were needed to support China’s economy.
Australian Dollar Steady Amid CPI Mix, RBA Tightness
The Australian dollar held steady just below a 19-month high on Wednesday, after a sharp rally in the previous session on Chinese support and a hawkish Federal Reserve.
Data released on Wednesday showed that inflation fell to a three-year low in August, while the decline in core inflation was less pronounced.
However, the decline in inflation was largely driven by government programs aimed at curbing high electricity prices, which were introduced earlier this year.
The Reserve Bank of Australia held steady on Tuesday, saying that while inflation is expected to ease in the near term, it only expects price pressures to sustainably reach its target range by 2026.
Reserve Bank of Australia Governor Michelle Bullock took a softer stance when speaking after the RBA’s decision on Tuesday. But she said the central bank had no plans to cut interest rates in the near term.
The New Zealand dollar pair settled near its strongest levels this year.
Broader Asian currencies were mixed. The Japanese yen was steady at 143.3 yen after corporate services price index data came in slightly higher than expected for August, suggesting higher producer prices.
The Singapore dollar pair fell slightly, while the South Korean won pair rose by 0.3%.
The Indian rupee pair fell 0.1% as it extended its recovery from record highs hit earlier in September.
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