Investing.com – Most Asian currencies held in tight ranges on Wednesday, while the dollar neared a six-month high as anticipation of a Federal Reserve meeting kept traders leaning heavily toward the U.S. dollar.
That led to the Japanese yen weakening even after perceived government intervention sparked a sharp rebound in the currency earlier this week.
Asia’s many regional holidays, such as Labor Day, also caused most regional currencies to tread water.
Dollar near six-month high as interest rate concerns rise ahead of Fed meeting
The index rose 0.2% in Asian trading, extending gains overnight as markets await the end of the Fed’s two-day meeting later on Wednesday.
Many expect the Fed to do this. But Fed Chairman Jerome Powell is likely to offer a hawkish view on rates, especially after a slew of higher-than-expected inflation readings.
Better-than-expected first-quarter data fueled concerns about persistent inflation and was a key driver of the dollar’s gains on Tuesday.
The Fed is now expected to begin cutting interest rates only by September of this year, if at all. Powell is also expected to provide more information on rate dynamics.
Japanese yen weakens, USDJPY rises despite suspicions of intervention
The pair, which measures the amount of yen needed to buy one dollar, rose slightly on Wednesday after rising sharply in overnight trading. The pair hovered around 158, having experienced limited declines following suspected Japanese government intervention earlier this week.
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USDJPY fell to 155 on Monday before recovering on Tuesday as markets remained unconvinced by the Bank of Japan’s higher inflation forecasts.
The biggest pressure point on the yen continued to be the prospect of higher US interest rates and a stronger dollar.
Other Asian currencies were muted amid holidays and Fed caution. The Australian dollar fell slightly as pressure on the dollar outweighed growing speculation over a possible interest rate hike by the Reserve Bank of Australia.
The RBA is set at 0 and could potentially take a hawkish stance following stronger-than-expected inflation figures in the first quarter.
The Indian rupee rose 0.1% and was close to a record high, with rupee volatility set to continue amid the 2024 general elections.
The offshore Chinese yuan fell slightly amid some hopes for additional stimulus measures in the country.