Asian currencies kept to a tight band on Wednesday as markets sought more cues on extended ceasefire talks between the U.S. and Iran, while soft U.S. inflation data released overnight provided some relief.
The dollar rose marginally in Asian trade after falling for seven consecutive sessions, as hopes for an Iran ceasefire sapped the greenback of some safe haven demand, as did cooling inflationary concerns.
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The Chinese yuan was steady ahead of key first-quarter gross domestic product data due on Thursday, while the Japanese yen weakened slightly and remained close to recent 1-½ year lows.
Dollar steady after soft PPI; Yellen sees at least one rate cut this year The dollar index and dollar index futures rose less than 0.1% each on Wednesday, with the greenback remaining under pressure after seven straight days of losses.
The greenback had fallen on Tuesday after producer price index inflation data read softer than expected for March. While the print did show higher energy inflation due to the Iran war, core prints pointed to relatively smaller increases in prices.
The print drummed up some hopes that the inflationary effects of the Iran war will not be as dire as expected, giving the Federal Reserve more headroom to cut interest rates this year.
Separately, former Fed Chair and Treasury Secretary Janet Yellen said on Wednesday that she expects at least one rate cut by the Fed this year, despite inflation and economic uncertainty from the Iran war.
Asia FX muted as US-Iran blockade takes full effect Asian currencies were largely flat on Wednesday, as anticipation of more cues on U.S.-Iran ceasefire talks kept traders on the sidelines.
The Japanese yen’s USD/JPY pair rising 0.1%, while the Chinese yuan’s USD/CNY pair moved little. Chinese GDP data for the first quarter is due on Thursday, and is expected to show growth picking up after a soft December quarter.
The South Korean won’s USD/KRW pair was flat after incoming Bank of Korea Governor Shin Hyun-song struck a hawkish note during his parliamentary confirmation hearing. Shin warned that inflationary effects from the Iran war and a weak won could spur a hawkish stance from the BOK in the coming months.
South Korean trade data also read substantially stronger than expected for March, as the country’s key chip exports saw outsized demand from the artificial intelligence industry.
The Australian dollar’s AUD/USD pair rose 0.3%, reflecting some improvement in risk appetite, while the Indian rupee’s USD/INR pair rose 0.1% after consumer price index inflation data read softer than expected for March.
The Singapore dollar’s USD/SGD pair was flat, moving little after the Monetary Authority slightly tightened policy on Tuesday.
The U.S. military said on Tuesday evening that its naval blockade against Iran had completely taken effect, and that all economic trade to and from the country was now cut off.
The move stands to potentially complicate peace talks with the U.S., although a tenuous ceasefire deal still appeared to be holding as of Wednesday morning.
U.S. President Donald Trump said on Tuesday that more U.S.-Iran talks were likely in the next two days, and that he saw an end to the war as very close.
