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Asian currencies were mostly unchanged against the U.S. dollar on Wednesday as investors awaited key U.S. inflation data that could shape expectations for the Federal Reserve’s next interest-rate decision. Meanwhile, rising oil prices and renewed tensions around the Strait of Hormuz added pressure to regional markets.
The U.S. Dollar Index remained broadly stable at around 99.87 during early Asian trading. The Japanese yen also showed little movement, with USD/JPY trading near 159.41 despite recent coordinated intervention by Japan and the United States aimed at supporting the currency.
China’s yuan was similarly subdued, with both onshore USD/CNY and offshore USD/CNH rates showing limited movement as traders avoided major positions before the U.S. Consumer Price Index report.
Economists expect headline U.S. CPI to increase 0.1% in July after declining 0.4% in June, while annual inflation is forecast to ease to 3.4% from 3.5%. The inflation report could significantly influence the Fed rate outlook. Futures markets indicated nearly even expectations for September, with a 52% probability that interest rates remain unchanged and a 48% chance of a 25-basis-point hike.
A weaker-than-expected U.S. inflation reading could increase expectations for easier monetary policy and pressure the dollar, potentially supporting Asian currencies. Conversely, stronger inflation could boost the greenback and weigh on regional foreign exchange markets.
Elsewhere, USD/SGD gained about 0.1%, while the Indian rupee remained broadly flat. The South Korean won underperformed its regional peers, with USD/KRW rising around 0.4%. The Australian dollar was steady after the Reserve Bank of Australia unanimously kept its benchmark interest rate at 4.35%.
Oil prices also remained a key concern for Asian markets. Brent crude climbed toward $90 per barrel amid uncertainty over a U.S.-Iran peace agreement and renewed attacks on shipping. Iranian officials said the Strait of Hormuz would remain closed unless Washington accepted conditions to end the conflict.
Higher crude oil prices could increase import costs and inflation risks across energy-dependent Asian economies, while continued U.S. dollar strength may add further pressure on regional currencies.
