Asian currencies ease as dollar steadies, euro and pound slip

Investing.com -- The U.S. dollar held near a two-week high in European trading on Wednesday, with the euro and pound weakening as rising oil prices and global bond yields kept inflation concerns elevated. The New Zealand dollar weakened sharply, with USD/NZD rising 0.9% to 0.5843, putting the kiwi at its lowest level since August 13. The move followed the Reserve Bank of New Zealand’s 25-basis-point rate increase and a less-hawkish policy outlook. ANZ analysts said the policy track did not point to another increase in October and that the language around future decisions was deliberately vague and highly conditional. With an October hike seen as less likely, wholesale rates and the New Zealand dollar moved lower. The U.S. Dollar Index rose to 99.74, holding near a two-week high. EUR/USD fell 0.2% to 1.1576, while GBP/USD declined marginally to 1.3504. Dollar gains as oil and bond yields revive inflation fears The dollar’s safe-haven appeal was reinforced by rising Treasury yields and growing expectations of a September Federal Reserve rate hike, even though recent U.S. economic data came in below forecasts. July JOLTS job openings and the August ISM manufacturing index both undershot expectations. Markets nevertheless raised the probability of a September Federal Reserve rate hike to 68% from around 40% a week earlier, according to CME FedWatch. Friday’s U.S. employment report and next week’s consumer inflation data will be important tests before the Federal Reserve’s September meeting. Global bond markets remained under pressure. The U.S. 10-year Treasury yield rose to 4.81%, its highest level since late 2023, while global yields climbed to their highest levels since 2008. The 30-year Treasury yield also returned to levels seen before Treasury Secretary Scott Bessent expanded a buyback program aimed at containing long-term borrowing costs. Rising energy prices are adding to inflation concerns that were already being driven by government spending and heavy corporate borrowing to finance the artificial-intelligence buildout. The United States launched fresh strikes on Iran, while Tehran retaliated. The Australian dollar also weakened, with USD/AUD rising marginally to 1.4006. Australia’s 10-year bond yield reached 5.25%, its highest level since July 2011. Australia’s economy grew 0.4% in the June quarter and 2.1% from a year earlier, according to the Australian Bureau of Statistics. Markets now price around a 58% chance of a Reserve Bank of Australia rate hike on September 29, while stronger bond yields have added support to the case for tighter policy. Yen hovers above 160 as BOJ signals September rate debate USD/JPY rose to 160.21, keeping the yen above the closely watched 160-per-dollar level. BOJ Governor Kazuo Ueda said the central bank will debate a rate increase at its September 17-18 meeting, with officials focused on whether inflation risks are intensifying. The comments reinforced expectations of a September hike. U.S. Treasury Secretary Scott Bessent met Ueda at the G20 gathering and called for decisive monetary steps to address yen weakness. Japan and the United States also agreed to continue coordinating on orderly yen movements after their rare joint intervention in July. BOJ board member Hajime Takata, the sole dissenter at the July meeting, called for more nimble rate hikes on Wednesday, reinforcing market attention on the September decision. The Chinese yuan weakened marginally, with both USD/CNH and USD/CNY rising slightly. The Indian rupee was firmer, with USD/INR trading flat at 94.916. The South Korean won strengthened, with USD/KRW falling 0.5% to 1,366.88 after South Korea’s August CPI rose 3.1% year-on-year, up from 2.8% in July but below the 3.2% forecast. Core inflation accelerated to 3.4%, its highest level since May 2023. The Singapore dollar weakened slightly, with USD/SGD rising to 1.2733, while USD/MYR gained 0.2% to 4.0441. Malaysia’s central bank decision is due on Thursday. This article was generated with the support of AI and reviewed by an editor.