Asian FX firms fall, dollar holds as CPI data looms By Investing.com

Investing.com– Most Asian currencies strengthened slightly on Thursday, recovering a measure of recent losses, while the dollar settled near a seven-week peak ahead of key consumer inflation data.

Regional currencies have been nursing losses over the past week amid growing doubts about the pace of future Federal Reserve interest rate cuts.

That trend was somewhat offset by the minutes of the Fed’s September meeting, which showed policymakers fully supporting the central bank’s 50 basis point rate cut then. But they also remained non-committal on the pace of future easing.

Some improvement in sentiment towards China also drove Asian currencies as Beijing signaled plans to start implementing fiscal stimulus measures.

The dollar is set with CPI data on tap

And they fell slightly in Asian trade but remained close to seven-week highs hit earlier this week.

The focus was squarely on inflation data due later in the day, which is likely to factor into the Fed’s interest rate plans. The data is expected to show that CPI inflation eased slightly while remaining sticky.

Strong wages data released last week saw traders cancel bets that the central bank will cut rates again by 50 bps in November.

Traders were seen pricing in a 79.5% chance of a 25bps cut in November and a 20.5% chance of a hold.

Chinese yuan firms with tax incentives in focus

The Chinese yuan pair fell 0.2 percent, reversing some recent weakness, as traders looked for more stimulus from Beijing to support growth.

China’s Finance Ministry said it will hold a briefing on Saturday to outline fiscal stimulus plans after a series of recent monetary stimulus measures largely disappointed markets.

However, any further stimulus measures spells weakness for the yuan, especially if local interest rates fall further.

Most units in Asia strengthened on Thursday but suffered recent losses. The Japanese yen pair fell 0.1% after hitting a more than two-month high. The currency received little support from stronger-than-expected inflation data as markets bet the Bank of Japan would struggle to raise interest rates further.

The South Korean won rose 0.3%, while the Singapore dollar fell slightly.

The Indian rupee pair remained close to record highs, with the rupee facing weakness after the Reserve Bank of India signaled a shift from its bullish stance.

The Australian dollar rose 0.2%, tracking some optimism over China.