Asia FX Stable as Fed and Inflation Signals Loom; Kiwi Drops After RBNZ Cut

Most Asian currencies remained within a narrow range on Wednesday, while the dollar stabilized as traders awaited further insights from the Federal Reserve and upcoming U.S. inflation data that could influence interest rate decisions.

The New Zealand dollar struggled against its counterparts, experiencing a notable decline after the Reserve Bank of New Zealand reduced interest rates and adopted a dovish stance.

Optimism regarding additional stimulus measures in China waned, as the government provided limited information on plans for economic support. The yuan was also recovering from significant losses sustained in the previous session.

### Dollar Maintains Stability Ahead of Fed Developments

The dollar index and dollar index futures showed little movement during Asian trading, remaining near a seven-week peak reached on Monday. The dollar’s strength followed strong payroll data, which raised questions about the urgency for the Fed to make further substantial interest rate cuts.

Market participants were pricing in an 83.2% likelihood that the Fed would reduce rates by 25 basis points in November, with a 16.8% chance that rates would remain unchanged. The minutes from the Fed’s September meeting, when the central bank reduced rates by 50 basis points, are expected later on Wednesday and could provide additional insights into future policies.

Consumer price index data for September will also be released later this week, which is likely to influence the Fed’s projections.

### New Zealand Dollar Declines Following RBNZ Rate Cut

The New Zealand dollar fell by 1% on Wednesday after the Reserve Bank of New Zealand implemented a 50 basis point rate cut and conveyed a dovish outlook. The decrease was at the higher end of market predictions, with the bank citing weakening inflation and economic growth as factors behind its decision.

This move marked the second rate cut by the RBNZ this year, with the central bank sending mixed signals regarding the possibility of further rate decreases.

### Chinese Yuan Stabilizes After Previous Losses; Stimulus Enthusiasm Fades

The Chinese yuan weakened slightly on Wednesday, with the currency pair rising by 0.1%. This followed a larger increase of 0.6% in the prior session, which occurred as onshore trading resumed after the Golden Week holiday.

Confidence in China’s economy was dampened by the government’s lack of specific details on the implementation of new stimulus initiatives, which include interest rate cuts and increased liquidity support. Additionally, lower interest rates could pose further challenges for the yuan.

Other Asian currencies mostly traded within a narrow range, with commodity-linked currencies like the Australian dollar declining amid concerns over the Chinese economy; the Australian dollar pair dropped by 0.2%.

The Japanese yen showed little movement after experiencing significant depreciation against the dollar in the week prior. Meanwhile, the Indian rupee remained near record highs ahead of a Reserve Bank of India meeting, where it is widely anticipated that the central bank will keep rates unchanged.