Asian Currencies Steady as Traders Await U.S. Inflation Data and Fed Rate Decision

Asian currencies traded in narrow ranges on Wednesday as markets focused on upcoming U.S. inflation data and rising expectations of Federal Reserve rate cuts. The U.S. dollar stabilized after touching seven-week lows, with traders cautious ahead of key economic releases.

The Chinese yuan slipped slightly, with USD/CNY rising 0.1% after inflation data confirmed persistent disinflation in the world’s second-largest economy. China’s consumer price index fell 0.4% in August, signaling weakening domestic demand as government subsidies faded. Producer prices contracted 2.8% for the 35th straight month, underscoring continued economic pressure and the potential need for more stimulus measures. Analysts noted that while Beijing’s interventions supported the yuan recently, further monetary easing could undermine the currency.

Broader Asian currencies showed mixed moves. The Japanese yen held near 147.45 per dollar, stabilizing after volatility linked to Prime Minister Shigeru Ishiba’s sudden resignation. The Australian dollar gained 0.2% on higher oil and copper prices, while the Singapore dollar was flat. India’s rupee weakened 0.1% as trade tensions with the U.S. persisted, with Washington maintaining tariffs and signaling possible higher duties over Russian oil imports. The South Korean won edged down 0.1%.

The dollar index steadied in Asian trading but remained near recent lows as markets priced in a 95% chance of a 25 basis point Fed rate cut next week, with a small chance of a deeper 50 bps cut. Traders now await U.S. Producer Price Index data on Wednesday and Consumer Price Index data on Thursday, which are expected to shape final market bets ahead of the Fed’s September 16-17 meeting.