Investing.com — Most Asian currencies remained range-bound on Wednesday, while the dollar retreated from two-year highs as traders awaited key consumer inflation data likely to weigh on interest rate expectations.
The focus remained on incoming US President Donald Trump's plans for further trade tariffs, while comments from several Federal Reserve officials were also heard.
Traders are also awaiting China's interest rate decision and labor market data from Australia – due in the coming days – for further signals in Asian markets.
The Chinese yuan pair is hovering around the highest level in 16 months, while the Australian dollar pair fell 0.2% and remained close to the lowest level in five years.
Concerns about rising US interest rates pressured most other Asian currencies. The Japanese yen pair was flat, receiving little support from the Bank of Japan's comments that the central bank will discuss raising interest rates when it meets next week.
The Singapore dollar pair rose 0.1 percent, while the Indian rupee pair rose slightly after hitting a record level of more than 86.6 rupees. The Indian index fell to a four-month low in December, data showed on Tuesday.
Dollar hovers below two-year highs on CPI forecast
The US dollar stabilized in Asian trade after falling from its highest level in more than two years in overnight trading.
The dollar's weakness was largely driven by weaker-than-expected inflation data for December. This reading has prompted some hopes that inflation will ease and give the Fed more room to continue lowering interest rates.
But some components of the Producer Price Index reading — which also goes into the data, and is the Fed's preferred measure of inflation — were stronger for December, suggesting core inflation is likely to remain high.
The focus is now squarely on inflation data due later on Wednesday for further evidence on interest rates. The reading comes amid growing concern that steady inflation will keep US interest rates high for longer, especially after the Federal Reserve warned of a slowdown in the pace of interest rate cuts this year.
The focus was also on Trump's plans for trade tariffs, which central bank members warned could support inflation in the long term. Reports this week showed that Trump's team is considering a plan to gradually increase tariffs.
South Korea won steadily after the arrest of President Yoon
The South Korean won pair stabilized after local media reports said that ousted President Yoon Suk-yeol was arrested due to his failed attempt to impose military law in December.
Authorities arrested Yoon at the presidential complex in their second attempt this month to arrest the president, who will now stand trial on charges of rebellion.
Yoon's arrest marks a potential end to the growing political uncertainty in South Korea following his impeachment in early December. The won fell to its weakest level since 2009 amid growing political uncertainty.
