Investing.com– Most Asian currencies moved lower on Wednesday as growing bets on a slower pace of US interest rate cuts supported the dollar, while the yen steadied Japanese as government officials warned of possible intervention.
Regional markets were also reeling from worsening trade relations between the US and China, after Washington added two major Chinese companies to a blacklist of companies with ties to China's military.
The move comes just before the inauguration of President-elect Donald Trump on January 20, with Trump promising to impose steep trade tariffs on China. The Chinese yuan pair steadied after touching its weakest level in 17 years earlier this week.
Among other Asian units, a pair of South Korean winners rose 0.1% amid continued political uncertainty in the country.
The Singapore dollar pair rose 0.1%, while the Indian rupee stood at 85.8 rupees after hitting highs above 86 rupees last week.
Dollar optimistic on strong labor, PMI data
The and remained steady in Asian trade on Wednesday, after rising sharply in overnight trade.
The greenback was particularly boosted by stronger-than-expected data for November, which showed the labor market remained strong. The data came just days before key data for December, which is expected to offer more accurate clues on the labor market this week.
Strong data fueled bets that inflation will remain sticky in the coming months, giving more impetus to the Federal Reserve to cut rates at an unusual pace.
The central bank warned that it will significantly slow the pace of rate cuts in 2025 over concerns about sticky inflation and strength in the labor market.
Higher for longer US interest rates going down badly for Asian markets, as they show smaller rate differentials for regional assets.
The Japanese yen will stand firm amid intervention talk
The Japanese yen pair hovered around the low 158s on Wednesday, having recovered slightly from its weakest level in nearly six months.
The yen pared its recent losses after government officials verbally warned of possible currency market intervention, which saw traders take more caution in shorting Japanese currency.
The prospect of higher US interest rates and a dovish outlook from the Bank of Japan weighed on the yen throughout December, pushing the USDJPY pair close to levels that invited government intervention at last.
Traders are looking at 160 yen as a possible intervention point.
Australian dollar flat as markets gauge mixed CPI data
The Australian dollar pair recovered early losses to trade flat as traders digested mixed inflation data from the country.
Headline inflation was higher than expected in November, while core inflation eased slightly.
The reading provided mixed information on when the Reserve Bank of Australia might start cutting interest rates, as core inflation remained above its target range of 2% to 3%.
Analysts expect the RBA to start cutting rates just before the second quarter, although Wednesday's data prompted some bets on an earlier cut.
