Asian FX Markets Unchanged After Powell; Australian Dollar Strengthens

Asian currencies and the U.S. dollar traded largely unchanged on Wednesday after Federal Reserve Chair Jerome Powell delivered a cautious outlook on monetary policy. Powell stressed the difficulty of balancing inflation control with employment risks, noting that there is no “risk-free path” as the central bank manages persistent price pressures alongside weakening job growth.

The U.S. Dollar Index, which tracks the greenback against a basket of major peers, inched up 0.1% and held near post-Fed decision levels. Futures tied to the index also rose 0.1% in early Asian trading. Powell’s remarks left markets uncertain about the timing of the next rate cut, though investors continue to price in two additional cuts this year in line with Fed guidance. Chicago Fed President Austan Goolsbee later echoed that the central bank has room to lower borrowing costs if inflation trends lower, but warned against aggressive easing given ongoing inflation risks.

Currency markets responded with muted moves. The Japanese yen’s USD/JPY pair gained 0.1%, while the South Korean won’s USD/KRW stayed flat. The Singapore dollar’s USD/SGD edged up 0.1%, and the Indian rupee’s USD/INR showed little change. In China, both the onshore yuan (USD/CNY) and offshore yuan (USD/CNH) rose 0.1%. Traders now look ahead to Friday’s U.S. core Personal Consumption Expenditures (PCE) report, the Fed’s preferred inflation gauge.

The standout performer was the Australian dollar. The Aussie rose 0.4% against the greenback after consumer price index (CPI) data showed a 3.0% year-over-year rise in August, slightly above forecasts and the fastest pace in a year. The figure hit the top of the Reserve Bank of Australia’s 2–3% target range, raising doubts about further rate cuts despite earlier signals of easing. Markets expect the RBA to hold its 3.6% cash rate steady at its September 29–30 meeting before potentially trimming rates in November.

Meanwhile, New Zealand appointed Anna Breman as the new Governor of the Reserve Bank of New Zealand, effective December 1. Breman, a former Deputy Governor at Sweden’s Riksbank, becomes the first woman and first foreign national to lead the RBNZ. The New Zealand dollar, however, remained flat against the U.S. dollar.