Asian currencies muted despite easing inflation concerns

The yen’s USD/JPY pair held near 164 yen, while the Singapore dollar’s USD/SGD pair edged 0.1% higher

Asian currencies traded in tight ranges on Tuesday despite easing oil prices tempering inflation concerns.

The yen’s USD/JPY pair held near 164 yen.

The yen remained pinned near multi-decade lows, with the USD/JPY pair little changed at 163.72 yen, as traders looked to Friday’s Bank of Japan decision for new guidance on the pace of policy normalisation.

While policymakers are widely expected to leave interest rates unchanged, markets expect the central bank to keep the door open to further tightening after repeated verbal intervention has done little to stop the yen’s prolonged decline.

The won’s USD/KRW pair was little changed even after the equity market suffered a sharp technology-led selloff.

The yuan’s offshore USD/CNH and onshore USD/CNY pairs traded largely unchanged.

Meanwhile, hopes for a diplomatic breakthrough between Iran and U.S. extended the previous session’s sharp decline in crude prices after the two countries paused mutual strikes.

The Singapore dollar’s USD/SGD pair edged 0.1% higher, as traders continued to digest the Monetary Authority of Singapore’s policy tightening on Monday.

The Australian and New Zealand dollars were little changed, with USD/AUD and USD/NZD holding near recent levels as traders balanced softer oil prices against caution ahead of the central bank decision.

Rupiah remained the weakest performer, with USD/IDR jumping 0.5%, extending losses following the surprise resignation of Bank Indonesia Governor Perry Warjiyo earlier this week.

Deputy Governor Destry Damayanti has been appointed acting governor as investors assess the implications for policy continuity.

Warjiyo, who has led the central bank since 2018, oversaw a policy framework that combined interest-rate adjustments, liquidity management, foreign-exchange intervention and close coordination with the government to navigate shocks ranging from the pandemic to the recent war in West Asia.

Investors will be looking for reassurance that Bank Indonesia remains under experienced and independent leadership to sustain confidence in the monetary policy framework and preserve the central bank’s institutional autonomy, Radhika Rao, senior economist at DBS, said.

Elsewhere, lower oil prices continued to underpin currencies of major energy importers. The Indian rupee’s USD/INR slid 0.1% as the currency benefited from fading geopolitical risk premiums, reports of official intervention and the Reserve Bank of India’s recent measures to attract capital.

The Philippine peso remained near its record low of 61.85 per dollar, even as USD/PHP edged 0.1% lower after easing oil prices reduced pressure on the economy of the oil-importing country. BSP Governor Eli Remolona said the central bank intervened modestly last week to keep markets orderly.