Asian FX Muted Before Fed Minutes, Australian Dollar Dips Below $0.7

By Ambar Warrick

Investing.com-- Asian currencies moved little on Wednesday ahead of the minutes of the Federal Reserve’s latest meeting, while the Australian dollar fell the most among its peers on weaker-than-expected wages data.

China’s yuan recovered slightly from a three-month low, while Hong Kong dollar moved less than 0.1%. Most Southeast Asian currencies also marked small moves.

The U.S. dollar index fell 0.1%, while dollar index futures retreated in a similar band ahead of the Fed minutes, due later in the day. While softer-than-expected U.S. inflation readings last week had seen traders trim their bets on a sharp interest rate hike in September, markets are still wary of any more hawkish commentary in the minutes.

The Fed had raised interest rates by 75 basis points in July, and vowed more support to help control inflation. Several Fed members have also flagged more interest rates this year, given that inflation is still pinned near 40-year highs.

Australia’s dollar was an outlier among its Asia-Pacific peers on Wednesday, falling 0.4% to below the key 0.7 level against the greenback.

The country’s wage price index rose less than expected in the second quarter, putting less impetus on the central bank to hike interest rates at a sharp clip.

The Reserve Bank of Australia had hiked interest rates as expected in August, but had signaled a data-dependent approach to its future rate hikes. Inflation in the country surged to a 20-year high this year.

The Japanese yen moved little against the dollar, but appeared to have curbed recent losses to the greenback.

Japan logged a bigger-than-expected trade deficit in July, but easing commodity prices and a recovery in the yen may help reverse this trend.

The New Zealand dollar reversed early gains, and traded flat as the central bank raised interest rates by 50 basis points to 3.0%, as expected. The bank also struck a hawkish tone on future rate hikes, as it moves to bring runaway inflation back into its target range.