Asian Currencies Steady as Dollar Holds Ground After Fed Rate Cut

Asian currencies traded mostly flat on Thursday, with the Japanese yen drawing attention ahead of a key policy meeting by the Bank of Japan (BOJ). The USD/JPY pair hovered around 146.98, steady after recent gains.

The BOJ is widely expected to keep interest rates unchanged when its two-day meeting concludes on Friday. Still, sticky inflation in Japan is fueling speculation that the central bank may deliver another rate hike later this year. August’s consumer price index data, due just before the decision, is projected to show price pressures remain elevated, with core inflation still running well above the BOJ’s 2% target.

Political uncertainty following Prime Minister Shigeru Ishiba’s sudden resignation earlier this month adds another layer of caution for traders watching the yen.

Dollar Steadies as Markets Digest Fed’s Outlook

The U.S. dollar held firm in Asian trading, consolidating gains made overnight after the Federal Reserve cut interest rates by 25 basis points on Wednesday. The move, widely expected, was aimed at countering a cooling labor market.

Although the Fed signaled further cuts may follow, policymakers struck a more cautious tone than President Donald Trump’s calls for aggressive easing. Chair Jerome Powell emphasized ongoing risks tied to inflation and weaker hiring, signaling a more balanced approach.

The dollar index had fallen to a 3.5-year low ahead of the decision but rebounded sharply after the Fed’s announcement. Fed board member Stephen Miran was the lone dissenter, advocating a deeper 50 basis point cut in line with Trump’s push for looser policy.

Broader Asian FX Mixed; Safe Havens Hold Firm

Elsewhere in Asia, currencies traded in narrow ranges. Safe-haven assets such as gold and the yen found support as concerns linger over the U.S. economic outlook.

The Chinese yuan edged 0.1% higher, with USD/CNY cooling slightly after the yuan rallied to near 10-month highs earlier in the week. Beijing pledged additional stimulus measures to revive private consumption, following a string of weak economic data.

The New Zealand dollar was the biggest regional loser, dropping 0.6% after GDP data revealed the economy contracted in the second quarter. The Australian dollar eased 0.1% against the U.S. dollar after touching 10-month highs earlier in the week.

The Indian rupee slipped 0.3% but remained just below the 88-per-dollar mark, having touched multiple record lows in September. South Korea’s won weakened 0.3%, while the Singapore dollar inched 0.1% lower.

Asia Watches Fed and BOJ for Next Moves

While lower U.S. interest rates are generally supportive for Asian currencies, rising risks in the U.S. economy could weigh on broader risk appetite. Traders now turn their focus to Friday’s BOJ meeting and Japanese inflation data, which could set the tone for the yen and ripple across regional markets.