Asian Currencies Range-Bound as Dollar Eases Ahead of CPI Data
Most Asian currencies traded within a narrow range on Wednesday, while the dollar retreated from over two-year highs as markets awaited key U.S. consumer inflation data, which could influence future interest rate decisions.
Investor focus remained on U.S. President Donald Trump’s proposed trade tariffs, as well as comments from several Federal Reserve officials expected later in the day.
Asian markets were also keeping an eye on China’s upcoming interest rate decision and Australian labor market data, due later this week, for further market direction.
The Chinese yuan (USD/CNY) hovered near a 16-month high, while the Australian dollar (AUD/USD) dipped 0.2%, remaining close to a five-year low. Concerns over higher U.S. interest rates weighed on most Asian currencies, with the Japanese yen (USD/JPY) trading flat despite comments from the Bank of Japan suggesting it will discuss raising rates in its upcoming meeting.
The Singapore dollar (USD/SGD) rose 0.1%, while the Indian rupee (USD/INR) inched up slightly after hitting a record low of over 86.6 rupees. Indian inflation data showed consumer prices fell to a four-month low in December.
Dollar Near Two-Year High as CPI Data Looms
The dollar index and dollar index futures steadied during Asian trade, easing from a two-year high reached in overnight trading.
The dollar’s weakness was attributed to softer-than-expected U.S. producer price index (PPI) data for December, which raised hopes that inflation might ease, giving the Federal Reserve more room to continue cutting interest rates. However, certain components of the PPI, which are tied to the Fed’s preferred inflation gauge—the personal consumption expenditures (PCE) index—showed underlying inflation pressures remained elevated.
The spotlight is now on the U.S. consumer price index (CPI) report due later on Wednesday. Markets are anxious about persistent inflation potentially leading the Fed to maintain higher interest rates for longer, especially after the central bank signaled a slower pace of rate cuts in 2025.
Attention also turned to Trump’s proposed tariff hikes, which Federal Reserve officials warned could sustain inflationary pressures in the long term. Reports suggest Trump’s administration is considering a gradual rollout of the tariffs.
South Korean Won Stable Following President Yoon’s Arrest
The South Korean won (USD/KRW) held steady after reports confirmed that impeached President Yoon Suk Yeol was arrested for an alleged attempt to declare martial law in December.
Authorities detained Yoon at the presidential residence in their second attempt this month, following his impeachment earlier in December. He now faces trial for charges of insurrection.
Yoon’s arrest may signal the resolution of political turmoil that has weighed on South Korea. The won had fallen to its lowest level since 2009 during the height of the uncertainty but showed signs of stabilization after the arrest.
