Asian Currencies Flat on Fed Uncertainty; Aussie Unmoved After RBA Hold
Asian currencies were mostly steady on Tuesday as investors weighed mixed Fed signals, while the Aussie dollar was flat after the RBA kept rates unchanged.
The US dollar index was little changed but remained near its strongest level in three months, supported by expectations that the Fed will keep borrowing costs higher for longer.
RBA keeps rates steady as expected; AUD little changed
The Australian dollar’s AUD/USD pair was largely stable, as the country’s central bank kept rates unchanged as expected.
The Reserve Bank of Australia held its cash rate at 3.60%, stating that inflation remains considerably above target and that it will take time to bring price pressures back to target, suggesting no policy changes in the near future.
The central bank gave little indication as to when the next easing cycle might begin.
Dollar near 3-month high amid Fed uncertainty
Traders have scaled back expectations for another Fed rate cut in December after Chairman Jerome Powell struck a hawkish tone last week, warning that policymakers will proceed cautiously after making the first cut of this cycle.
Fed officials further reinforced this uncertainty on Monday with differing assessments of the economy’s trajectory. Governor Lisa Cook said that December remains a “live” meeting for further easing, but stressed that policy is “not on a predetermined path,” and cited risks surrounding both inflation and employment. In contrast, Governor Stephen Miran argued that monetary policy may still be too tight, saying that strong markets could be masking underlying weakness that requires deeper cuts.
San Francisco Fed President Mary Daly took a more balanced approach, describing last week's cut as "insurance" and emphasizing that the Fed should "carefully watch the data" before taking further action.
This divergence of views underscored the uncertainty hanging over markets, especially as the US government shutdown is delaying the release of official economic data.
Asian Currencies Stable
Across Asia, currencies were trading in a narrow range against the dollar.
The Japanese yen's USD/JPY pair fell 0.2%, while the Singapore dollar's USD/SGD was flat.
In China, the onshore yuan's USD/CNY pair was little changed, while the offshore pair USD/CNH rose 0.1%. The South Korean won's USD/KRW pair climbed 0.7%, bucking the regional trend.
The Indian rupee USD/INR fell 0.1%, while the Indonesian rupiah USD/IDR rose 0.4%.
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