The US Dollar (USD) traded lower against several Asia-Pacific currencies on Wednesday as markets awaited the release of the US Consumer Price Index (CPI) report, a key event expected to provide guidance on the Federal Reserve's policy trajectory [1][2][4]. The USD/JPY pair remained range-bound, trading around 158.30-158.35, close to its monthly high, with traders cautious ahead of US inflation data and the upcoming speech by Fed Chair Kevin Warsh [1]. Reports indicate Bank of Japan officials are unlikely to pursue a back-to-back rate hike, which undermined the Japanese Yen (JPY), though speculation about potential intervention limited aggressive moves [1]. Technical analysis shows USD/JPY holding above the 100-period SMA, with resistance at 158.75 and support at 157.94 [1].
The New Zealand Dollar (NZD) gained for the second consecutive day, trading around 0.5620, as the USD weakened on falling US Treasury yields and lower oil prices [2]. The 10-year Treasury yield fell to 5.194% and the 30-year to 5.548%, both retreating from multi-decade highs [2]. Dovish remarks from New York Fed President John Williams, who stated that one more rate hike may be appropriate this year but none in 2027, contributed to USD softness [2][4]. The CME FedWatch Tool reflected a 78% probability the Fed will hold rates steady this month and a 90% chance of a rate hike in December [2]. Market focus is on the US September CPI, expected to rise 3.6% year-over-year (up from 3.4% in August), with Core CPI projected at 2.5% (up from 2.4%) [2][4].
The Australian Dollar (AUD) outperformed its peers, rising 0.3% to around 0.7010 against the USD, supported by Reserve Bank of Australia (RBA) minutes indicating readiness to hike rates further this year [3]. The RBA raised its policy rate by 0.25 point to 4.60% in September, and analysts noted the central bank's concern about potential AUD weakness if overseas central banks raise rates aggressively [3]. The minutes also highlighted domestic risks, such as falling house prices potentially impacting household spending [3]. Employment data due Thursday is expected to show 20K new jobs in September, down from 39.5K in August [3].
The Indonesian Rupiah (IDR) remained steady, with USD/IDR trading around 17,930, as Bank Indonesia's interventions across spot and forward markets limited upside for the pair [4]. Fed’s Collins maintained a hawkish tone, emphasizing elevated inflation risks and support for the September rate hike, though the FXSFedSentiment Index showed a modest pullback in perceived hawkishness [4].
Across all sources, the US CPI report is identified as the central event, with expectations for higher headline and core inflation figures likely to influence Fed policy and impact currency markets [1][2][3][4].
CONCLUSION
Major Asia-Pacific currencies strengthened against the US Dollar as traders awaited the US CPI report, which is expected to clarify the Federal Reserve's policy outlook. Dovish Fed commentary and falling US yields weighed on the USD, while local central bank actions and policy signals supported the AUD, NZD, and IDR. The market remains focused on upcoming US inflation data, which will be pivotal for near-term currency movements.