Investing.com– Asian currencies and the dollar were largely muted on Wednesday as fresh U.S.-Iran attacks dampened hopes for a near-term peace deal, while investors awaited a key U.S. inflation report that could shape expectations for Federal Reserve policy.
The US Dollar Index was little changed as of 00:46 ET (04:46 GMT) but remained near a two-month high hit earlier this week.
Asia FX steady after Iran retaliates against US near Hormuz
Iran said on Wednesday it had targeted U.S. bases in Jordan and several Gulf states in response to President Donald Trump’s decision to order strikes on Iranian military sites near the Strait of Hormuz.
The escalation raised concerns over oil supplies and pushed crude prices higher, adding to worries that energy-driven inflation could remain elevated globally.
The Chinese yuan’s onshore pair USD/CNY traded largely unchanged.
Data on Wednesday showed China’s consumer inflation remained subdued in May even as factory-gate inflation accelerated to its highest level in nearly four years.
The South Korean won’s USD/KRW pair edged up 0.1%.
The Indian rupee’s USD/INR pair and the Singapore dollar’s USD/SGD edged down 0.1% each.
The Australian dollar’s AUD/USD pair dipped 0.2%.
US CPI awaited for Fed rate clues
The Japanese yen’s USD/JPY pair was broadly steady. Data showed Japan’s producer prices rose 6.3% in May from a year earlier, exceeding forecasts and reinforcing expectations that the Bank of Japan could continue normalising monetary policy at next week’s meeting.
Markets are now focused on U.S. consumer inflation data, due later on Wednesday, which could offer fresh clues on the Federal Reserve’s interest-rate outlook.
“A hot inflation print would reinforce “higher-for-longer” US rate expectations, supporting broad USD strength, particularly with the US–Iran conflict showing no signs of a swift resolution,” MUFG analysts said in a note.
Markets have largely priced in at least one rate hike this year, according to the CME FedWatch tool.
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