Most Asian currencies were little changed on Tuesday as investors weighed mixed messages from Federal Reserve officials over the path of interest rates, while the Australian dollar was muted after the RBA held interest rates steady.
The US Dollar Index was little changed but stayed close to its strongest level in three months, supported by bets that the Fed will keep borrowing costs higher for longer.
RBA holds rates as expected; AUD muted The Australian dollar’s AUD/USD pair was largely steady after the country’s central bank left rates unchanged, as widely expected.
The Reserve Bank of Australia kept its cash rate at 3.60%, saying inflation remains materially higher than expected and that it would take time to ensure price pressures return to target, suggesting no near-term policy shift.
The central bank gave little clue as to when the next easing cycle could begin.
Dollar near 3-month high amid Fed uncertainty Traders have scaled back expectations for another Fed rate cut in December after Chair Jerome Powell struck a hawkish tone last week, warning that policymakers will move cautiously after delivering their first cut of this cycle.
Fed officials on Monday reinforced that uncertainty with differing assessments of the economy’s trajectory. Governor Lisa Cook said December remains a “live” meeting for further easing but stressed that policy is “not on a preset course,” noting lingering risks around both inflation and employment.
In contrast, Governor Stephen Miran argued that monetary policy may still be too tight, saying buoyant markets could mask underlying weakness that warrants deeper cuts. San Francisco Fed President Mary Daly took a more measured stance, describing last week’s cut as “insurance” and emphasizing that the Fed should “watch the data carefully” before committing to more moves.
The divergence in views underscored the uncertainty hanging over markets, especially as the U.S. government shutdown continues to delay the release of official economic data.
Asia FX treads water Across Asia, currencies traded narrowly against the greenback.
The Japanese yen’s USD/JPY pair ticked down 0.2%, while the Singapore dollar’s USD/SGD traded flat.
In China, the yuan’s onshore pair USD/CNY was little changed, while the offshore pair USD/CNH ticked 0.1% higher.
The South Korean won’s USD/KRW pair jumped 0.7%, bucking the regional trend.
The Indian rupee’s USD/INR ticked down 0.1%, while the Indonesian rupiah’s USD/IDR rose 0.4%.
