Asia FX dips, dollar steady as sticky inflation clouds Fed outlook

Investing.com– Most Asian currencies retreated on Wednesday, while the dollar steadied as sticky U.S. inflation data cast some doubts over what the Federal Reserve will signal at the conclusion of a meeting later in the day.

Regional currencies were nursing some losses in recent sessions, as the dollar rebounded on signs of resilience in the U.S. labor market. Data for November also showed a mild uptick in inflation, indicating that the U.S. economy may not be cooling as rapidly as the Fed was anticipating.

This notion weighed on most Asian currencies, as did persistent concerns over an economic slowdown in China.

The lost 0.1%, extending losses after a dismal over the weekend. China slid further into disinflation territory in November, indicating that economic conditions in the country remained weak.

The shed 0.1%, having reversed much of a recent rally after media reports showed the Bank of Japan was in no hurry to tighten its ultra-dovish policy.

A meeting is also due next week, although the central bank is expected to signal no changes to negative interest rates.

The shed 0.1%, while the lost 0.2%.

Caution before the Fed saw risk-heavy Asian currencies log steeper losses. The fell 0.4%, while the led losses across Southeast Asia with a 0.5% fall.

The was flat, having taken few cues from a for November. But the reading was largely in line with a Reserve Bank of India warning that inflation will increase in the coming months, due to higher food prices.

Fed set to hold interest rates, but outlook uncertain

The and rose slightly in Asian trade.

Markets remained convinced that the later on Wednesday.

But strong labor market and sticky inflation readings brewed some uncertainty over what the central bank’s outlook is for 2024. rose more than expected in November, while inched up and remained well above the Fed’s 2% annual target.

Traders were seen , amid growing concerns that Fed Chair Jerome Powell could reiterate the bank’s higher-for-longer rhetoric.

Any hawkish signals from the Fed are likely to spur a sharp unwinding in risk-driven assets, which had rallied sharply over the past month amid optimism over a Fed pivot.

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