Asian currencies were steady on Wednesday as investors awaited results of the Federal Reserve meeting and clues on the pace of further US rate hikes as well as signals on the country’s inflation outlook. “The FOMC is clouding the dollar sentiment so investors are content sitting on the sidelines and not really doing much today” said Stephen Innes, senior trader at OANDA. The dollar index, which tracks the greenback against a basket of six major rivals, edged down 0.02 percent at 0541 GMT.
Conviction for a move beyond a widely expected rise now has faded for many forecasters along with the outlook for inflation for most, a Reuters poll showed. Growing doubts about the U.S. administration’s ability to pass tax and healthcare reforms through Congress, along with weak U.S. economic data have investors expecting a more dovish outlook, which would mean a greater gain for the Asian currencies, analysts say.
The U.S. May consumer price inflation data is also scheduled to be out on Wednesday morning Washington time. “The CPI data could actually provide significant bounce to the dollar. The CPI data for the last two months have come out negative and this is what really cooled the markets’ expectation for a further rate hike beyond June” Innes said.
Among regional currencies, the South Korean won edged up 0.3 percent on Wednesday, recouping losses from its previous session. Meanwhile, the Taiwan and Singapore dollars edged lower, down 0.05 percent and 0.03 percent respectively.
The yuan, which weakened the past two days, edged up 0.06 percent, after a slew of mixed economic data on Wednesday. China’s factory output grew 6.5 percent in May from a year earlier, slightly better than expectations, but fixed-asset investment grew 8.6 percent in the first five months of the year, less than forecast. After last week’s readings from China purchasing managers’ index surveys, Wednesday’s data “looks supportive and I think this is going to look pretty decent in the broader picture for the regional sentiment,” Innes added. “I would expect the risk on-sentiment to play positively.
SOUTH KOREAN WON
The won rose after three straight sessions of losses as a bounce in tech stocks on Wall Street took some pressure off following the rout in them. The Korea SE Electric and Electronics index climbed as much as 1.3 percent during Wednesday trade, but then the gains were erased.