Asia FX Tepid, Dollar Steadies Ahead of U.S. CPI Inflation

Asia FX Tepid, Dollar Steadies Ahead of U.S. CPI Inflation
Asia FX Tepid, Dollar Steadies Ahead of U.S. CPI Inflation
© Reuters

By Ambar Warrick– Most Asian currencies moved little on Tuesday, while the U.S. dollar curbed a recent losing streak as markets turned cautious ahead of hotly anticipated U.S. inflation data later in the day.

Regional units such as the , , and barely budged against the dollar in anticipation of the data.

The greenback on the other hand appeared to have stabilized after five straight days of losses. The fell 0.1%, while lost a similar amount. Both indicators lost about 2% each in the past five sessions, as they retreated from a 20-year peak hit last week.

Profit-taking and cooling inflation expectations were the biggest reasons behind the greenback’s retreat.

U.S. , due at 08:30 ET (12:30 GMT), is expected to show that inflation eased further off 40-year highs in August, declining for a second consecutive month. Markets hope the reading will provide more indicators of easing price pressures on the U.S. economy.

Rising inflation spurred a series of sharp interest rate hikes by the Federal Reserve this year, a move that boosted the dollar and significantly weighed on Asian currencies.

But even with inflation appearing to be on the downtrend, the Fed is widely expected to keep hiking interest rates until the reading comes between its annual target of 2%. Traders are pricing in of a 75-basis point hike by the central bank next week.

Still, expectations of an eventual softening in the Fed’s hawkish stance weighed on the dollar. This also benefited the and the – two currencies that saw outsized losses against the dollar this year due to a widening gulf in interest rates.

The Japanese yen rose 0.2% on Tuesday, while the euro added 0.1%. Both currencies are still trading near multi-year lows to the dollar.

In the Asia-Pacific region, the sank 0.2%, after data showed that and sentiment remained subdued in the country, despite a mild improvement in recent months.

The fell 0.2% ahead of and data due later this week. Annualized economic growth in the country is expected to have severely declined in the second quarter, due to rising inflation and interest rates.

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