Investing.com — Asian currencies traded mixed on Thursday as the U.S. dollar steadied after the Federal Reserve held interest rates unchanged, with investors awaiting fresh U.S. inflation data and upcoming policy decisions in Europe and Japan.
The Japanese yen edged higher ahead of the Bank of Japan’s Friday decision, while the New Zealand dollar remained under pressure after an unexpected rate hold by its central bank a day earlier. The Japanese central bank is expected to leave its policy rate unchanged at 1.25% after raising it last month.
The U.S. dollar index slipped marginally to 102.17, after the greenback retreated from a two-week high following Fed Chair Kevin Warsh’s press conference. The euro and the sterling traded little changed.
The USD/JPY pair fell marginally by 0.1% to 157.76, leaving the yen slightly firmer against the dollar. The Australian dollar traded at $0.7055, while the New Zealand dollar was at $0.5622.
Fed holds rates as PCE data takes focus
The Federal Reserve kept its policy rate unchanged at 3.75%-4.00% in a 10-2 vote on Wednesday, while upgrading its assessment of economic growth to describe activity as expanding at a strong pace.
The decision put further changes to borrowing costs on hold as policymakers await more evidence on inflation, with the next meeting coming after next week’s U.S. midterm elections.
Warsh expressed confidence that inflation could return to the Fed’s 2% target without significantly slowing economic growth or pushing unemployment higher. His press conference offered little clarity on whether another increase would come in December, prompting traders to reduce expectations for rate hikes in 2027.
Markets are still pricing in a 78% probability of a December rate hike, according to the CME FedWatch tool.
Investors now turn to September’s personal consumption expenditures price index, due later Thursday, for fresh clues on the outlook for rates.
Traders are also awaiting the ECB’s policy announcement later on Thursday, where it is widely expected to keep its deposit rate unchanged at 2.50%.
Kiwi stabilizes after RBNZ surprise, Aussie tracks inflation
The New Zealand dollar steadied at $0.5622, down 0.1%, after tumbling as much as 1.7% to around $0.5585 on Wednesday. The sharp decline followed the Reserve Bank of New Zealand’s unexpected decision to keep its official cash rate at 2.75%, contrary to market expectations.
