Asia FX Cut, Dollar Advances With Inflation, Fed on Tap By Investing.com

Investing.com– Most Asian currencies were little moved on Tuesday, while the dollar edged higher in anticipation of key inflation data that is likely to weigh on the outlook for U.S. interest rates.

Most regional currencies suffered some losses in the past week as risk appetite was hit by concerns over worsening global economic conditions.

But anticipation of US interest rate cuts helped limit overall losses while halting the dollar’s advance. But the greenback grabbed some bids this week amid positioning ahead of Wednesday’s inflation reading.

Dollar advances on CPI data, Fed meeting in sight

And both were up about 0.1 percent in Asian trade after posting strong gains on Monday.

Traders favored the greenback as risk sentiment worsened last week, while anticipation of key inflation data due on Wednesday also boosted dollar flows.

Wednesday’s figure is expected to show that inflation cooled further in August. The reading also comes just a week before , where the central bank is expected to cut interest rates by 25 basis points.

Lower rates are expected to weigh on the dollar and spur some flows into risk-driven Asian markets. But the full extent of such a turnaround will depend only on how much the Fed cuts rates this year.

Broader Asian currencies held in a tight range. The Japanese yen pair hovered around ¥143.22, having fallen sharply last week amid increased demand for the yen.

The Aussie dollar pair edged lower following weak economic readings from the country. A private survey showed consumer confidence worsened in early September and remained close to lows seen during the 2020 COVID-19 pandemic, amid growing concerns about an economic slowdown.

The South Korean won pair was up 0.2%, while the Singapore dollar pair was flat. The Indian rupee pair also traded sideways but was eyeing record highs.

Chinese yuan weakens after mixed trade data

The Chinese yuan pair rose 0.1 percent, with the currency losing ground after mixed trade data from the country.

China unexpectedly rose in August as the country’s industries largely shrugged off headwinds from trade restrictions imposed by the US and its allies.

But China grew much less than expected, raising concerns about sluggish local demand.

The yuan has already taken some losses over the past week following a string of disappointing Chinese economic readings.