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Asian currencies traded mixed on Thursday as the U.S. dollar hovered near a one-week high, supported by hotter-than-expected U.S. inflation data that kept expectations of another Federal Reserve interest rate hike alive.
The U.S. Dollar Index was largely unchanged at 99.15 by 00:43 ET (04:43 GMT), after gaining 0.3% in the previous session. The dollar remained supported after the U.S. personal consumption expenditures price index showed inflation running slightly above market expectations.
The PCE price index rose 3.7% year-on-year in July, unchanged from June but exceeding forecasts of 3.6%. Prices also increased 0.2% month-on-month, coming in stronger than anticipated.
The figures strengthened expectations that the Federal Reserve could maintain restrictive monetary policy for longer. Markets were pricing in roughly a 60% probability of a Fed rate hike next month, according to the CME FedWatch tool.
Investors are now focused on Fed Chair Kevin Warsh's speech at the Jackson Hole symposium for further signals on the outlook for U.S. interest rates and inflation.
The Japanese yen was little changed, with USD/JPY trading around 159.36. Bank of Japan Deputy Governor Ryozo Himino said timely rate increases could prevent inflation from accelerating sharply, although he stopped short of clearly signaling a September hike. Markets were pricing an 86% probability of a BOJ rate increase next month.
The South Korean won outperformed several regional currencies after the Bank of Korea raised its benchmark interest rate by 25 basis points to 3.00%, marking its second consecutive hike. USD/KRW fell 0.3%.
The BOK also increased its 2026 economic growth forecast to 3.3% from 2.6% while maintaining its inflation projection at 2.7%. Policymakers indicated additional tightening could follow gradually, with 3.25% seen as the most likely year-end policy rate.
Elsewhere, AUD/USD gained 0.2% to $0.718 after strong Australian inflation data boosted expectations for a Reserve Bank of Australia rate hike later this year. The Chinese yuan was broadly flat, the Singapore dollar strengthened 0.1%, while the Indian rupee weakened 0.2% against the dollar.
