Precise Investors Editorial Team
The Australian dollar outperformed, soaring to a near four-year high amid increasing confidence that the Reserve Bank of Australia will hike interest rates next week
Most Asian currencies kept to a tight range on Wednesday as mixed signals on the U.S.-Israel war with Iran kept traders to the sidelines.
The Australian dollar outperformed, soaring to a near four-year high amid increasing confidence that the Reserve Bank of Australia will hike interest rates next week.
The yen lagged after a soft producer inflation figure raised more questions over near-term rate hikes by the Bank of Japan.
The Australian dollar was the best performer in Asia, with the AUD/USD pair gaining 0.7% to $0.7175– its strongest level since mid-2022.
The currency was boosted by increasing confidence that the RBA could raise rates as soon as next week, especially as it grapples with increasing uncertainty over energy-fuelled inflation stemming from the Iran war.
Westpac analysts said the RBA is now expected to hike rates by 25 basis points in both March and May, citing inflationary risks from the Iran crisis.
The effect of higher oil prices on headline inflation is large but temporary. The RBA Monetary Policy Board will nevertheless feel compelled to react, especially given the hit to confidence and financial markets has so far not been severe, Westpac Chief Economist Luci Ellis wrote in a note.
Ellis added that the temporary nature of the energy shock still kept the possibility of a hold next week.
Broader Asian currencies largely lagged, remaining in a tight range as markets parsed mixed signals on the Iran war.
The yen’s USD/JPY pair added 0.1% and back above 158 yen, after producer price index inflation data for February read cooler than expected. The figure, which comes ahead of a widely expected decline in CPI inflation, sparked further doubts over the BOJ’s capacity to hike rates in the near-term.
The yen took fleeting support from an upward revision in gross domestic product growth in the fourth quarter.
The Singapore dollar’s USD/SGD pair dropped 0.1%, while the won’s USD/KRW declined 0.3%, reversing course after rising sharply this week.
The yuan’s USD/CNY pair shed 0.1% following another strong midpoint fix from the People’s Bank, while the Indian rupee’s USD/INR pair was flat above 92 rupees.
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