Asian currencies show mixed performance amid Fed expectations; dollar weakens, yen strengthens
Most Asian currencies fluctuated in a narrow range on Thursday as markets analyzed the Federal Reserve's (Fed) forecast of sustained inflation and slowing economic growth. The dollar weakened, however, despite the Fed still forecasting further rate cuts this year.
The Japanese yen was among the best performers of the day, strengthening to its highest levels in five months thanks to sustained demand for safe-haven assets. Attention also remains focused on possible further policy tightening by the Bank of Japan.
However, Japanese markets were closed due to a holiday, leading to lower trading volumes in Asia. The USD/JPY pair declined by 0.2%.
The Chinese yuan strengthened slightly - the USD/CNY pair showed a slight rise after the People's Bank of China left its key lending rate unchanged at a record low. Investors continue to expect additional stimulus measures from Beijing.
The USD/KRW pair for the South Korean won declined by 0.1%, while the USD/SGD pair for the Singapore dollar remained unchanged.
The Indian rupee also declined, with the USD/INR pair down 0.1%, continuing to retreat from record highs of Rs 88 reached earlier this year.
Dollar weakening amid Fed pause and lower growth outlook
The dollar index and dollar index futures were slightly lower in Asian trading, continuing a decline that began after the Federal Reserve left interest rates unchanged, which was widely expected by markets.
The central bank, however, maintained its forecast for at least 50 basis points of rate cuts this year despite expectations of higher inflation and lowered forecasts for economic growth in 2025.
Fed Chairman Jerome Powell noted the continued uncertainty about the state of the economy and the impact of trade tariffs imposed by Donald Trump's administration. The markets, however, were somewhat calmed by the fact that the Fed did not make any drastic changes despite concerns about persistent inflation and slowing economic growth.
Still, the prospect of lower interest rates continues to weigh on the dollar, which has already fallen to five-month lows amid concerns about the impact of U.S. fiscal and trade policies.