©Reuters
Investing.com– Most Asian currencies were little moved on Wednesday amid caution ahead of further signs of interest rate cuts from the Federal Reserve expected later in the day, with the dollar hitting a two-week high .
The Japanese yen extended its decline after the Bank of Japan struck a mostly accommodative chord, although this was the first time in 17 years.
Dollar hits 2-week high before Fed signals rate cuts
The e rose slightly in Asian trading, mainly focusing on the conclusion of the Fed meeting later in the day.
The central bank is expected to do so. But wait for any signal on potential rate cuts, particularly from Fed Chair Jerome Powell after the meeting.
Traders fear a potentially aggressive stance from the central bank as inflation has been higher than expected over the past two months.
USDJPY at 4-month high, EURJPY tests 2008 highs
The yen’s weakness saw the pair rise nearly 2% since Tuesday to around 151.30, its highest level since mid-November. The yen’s losses occurred even with Japanese markets closed for holidays.
The yen fared even worse against the euro, with the pair rising to its highest level since 2008.
The yen’s weakness came largely after BOJ Governor Kazuo Ueda said the central bank would maintain accommodative conditions to support the Japanese economy. His comments largely overshadowed the bank’s abandonment of negative interest rates and yield curve control.
Analysts at Citi said U.S. interest rates remain the main drivers of the yen and that the currency could only strengthen later in 2024 if U.S. rates begin to fall.
They also warned of potential intervention in currency markets by the Japanese government, especially if USD/JPY broke above 152.
Asian currencies in general moved little, as the Fed’s anticipation discouraged any big bets. The Australian dollar rose 0.1%, with the pair recovering from sharp losses in the previous session after the Reserve Bank of Australia kept interest rates stable and struck a loose chord.
The Chinese yuan remained flat, with the pair trading just shy of the psychologically important 7.2 level. The People’s Bank of China kept its benchmark unchanged on Wednesday as expected.
The South Korean won pair rose 0.1%, while the Singapore dollar moved little. The pair rose above the 83 level.