The dollar edged lower on Wednesday, while most Asian currencies barely budged as markets looked for more clues on monetary policy from key U.S. inflation data and the Fed’s March meeting minutes due later in the day.
A cautionary note on a possible recession from Minneapolis Fed chief Neel Kashkari also weighed on sentiment, although he also said that higher inflation could hurt the jobs market more.
The dollar index and dollar index futures both fell about 0.2%, with the futures trading at a lower level than the index, suggesting that investors are bracing for more downside in the greenback.
However, Asian currencies did not benefit much from this view, as expectations of U.S. consumer price index (CPI) inflation data kept traders cautious of risk-sensitive assets. The Chinese yuan was steady at 6.8871 per dollar, while the Japanese yen dipped 0.1%.
Japanese data also revealed that producer price index inflation cooled for a second straight month in March.
The South Korean won dropped 0.2%, while the Australian dollar was among the few gainers, rising 0.4% as it bounced back from sharp losses.
The U.S. CPI data is forecast to show that overall inflation slowed further in March from the previous month. But core CPI, which strips out volatile food and fuel costs, is expected to stay persistently high.
Attention is also on the minutes of the Fed’s March meeting, due later on Wednesday. While the Fed had pledged to keep hiking interest rates further, the recent failure of several U.S. banks and a slew of weak economic indicators made markets question how much room the central bank has to keep lifting interest rates.
Wednesday’s inflation report is also expected to reveal more about how much the Fed has to tighten policy further.
Some Asian economic indicators were also on the radar this week. The Indian rupee was unchanged ahead of local CPI data due later on Wednesday, which is forecast to show that inflation dropped significantly in March.
The reading also follows the Reserve Bank of India’s surprise decision to keep interest rates steady, saying that inflation had likely reached its peak.
Chinese trade data is also expected later this week after a report on Tuesday showed that inflation in the country remained below expectations.