Investing.com– Most Asian currencies moved in tight territory on Wednesday, while the dollar remained near three-week highs as traders hunkered down in anticipation of more announcements on interest rates from the Federal Reserve.
Reports of more fiscal spending in China did little to improve sentiment in regional currencies, with the yuan hovering around its weakest levels in 13 months.
Beyond the Fed, central bank decisions in Japan, Thailand, Indonesia and the Philippines are also due this week, providing more clues about Asian monetary policy going into 2025.
Most regional currencies were nursing losses against the dollar in recent sessions as traders largely turned to the greenback in anticipation of a slower pace of rate cuts in 2025 .
A stable dollar with a Fed outlook in focus
They both stood firm in Asian trade, still within sight of a three-week high hit earlier this week.
The Fed is widely expected. But traders are preparing for a potentially hawkish view from the central bank, especially because of recent data showing that US inflation remains sticky, and the labor market strong.
The central bank is expected to signal a slower pace of easing in 2025, with several analysts, including Goldman Sachs, expecting a hold in January.
Stronger-than-expected data for November, released on Tuesday, added to expectations that the Fed would have room to cut rates at a slower pace.
Expansionary and protectionist policies under incoming President Donald Trump are also expected to underpin inflation and rates in the coming years.
Chinese yuan near 13-mth low; a fiscal target does not provide much support
The Chinese yuan pair rose 0.1% on Wednesday, and was near its highest level since November 2023.
Reuters reported that China expected to increase its budget deficit to 4% from 3% of gross domestic product in 2025, and also targeted 5% annual GDP growth for the third consecutive year.
While the move includes higher fiscal spending, it also puts pressure on the yuan, as China is likely to loosen further monetary conditions to support its plans for more stimulus. make possible
BOJ, Asian central banks waiting
This week also focuses on a series of key Asian central bank meetings. In particular, the , which started a two-day meeting on Wednesday.
The Japanese yen was put down, with the pair crossing 153.5 yen amid uncertainty about what the BOJ will do. Analysts are divided between expectations for a hold or a 25 basis point increase.
The Thai baht pair rose 0.2%, and is expected to hold steady levels later on Wednesday. The Indonesian rupiah pair was also flat, with the country expected to keep rates unchanged on Wednesday.
The Philippine peso pair treads water before the central bank meeting on Thursday, where they are expected to cut rates for the third time this year.
Broader Asian currencies moved in a flat to lower range. The Australian dollar pair fell 0.3%, while the Singapore dollar rose 0.1%.
South Korea's pair of winners fell 0.2% amid continued reassurance from the government about economic stability, after President Yoon Suk Yeol's failed bid to impose martial law.
The Indian rupee pair steadied after hitting a record high above 85 rupees briefly earlier in the session. The currency was hit by steady capital flows from India, and pressure was also weak.
