The U.S. dollar eased slightly from an 18-month high as investors awaited September U.S. inflation data. Markets priced a 22% chance of a Fed rate increase at the October meeting, while strong Chinese trade figures and a surprise from Singapore's central bank moved Asian currencies.
The U.S. dollar eased slightly from an 18-month high on Wednesday, as investors waited for U.S. inflation data that could shape the Federal Reserve's interest-rate outlook. The US Dollar Index slipped 0.1% to 102.09, extending a 0.4% decline on Tuesday after touching its highest level since April 2025 earlier this week.
U.S. CPI test for Fed rate-hike bets
Economists expect headline inflation to accelerate to 3.6% year-on-year in the September consumer price index report, up from 3.4% in August. A stronger-than-expected core reading could revive expectations of a Federal Reserve rate hike this month.
Markets were pricing roughly a 22% chance of a quarter-point increase at the Fed's Oct. 27-28 meeting, with the probability of a pause near 78%. The Fed raised its benchmark rate by 25 basis points in September to a range of 3.75%-4.00%, its first increase since 2023.
Meanwhile, the Fed's latest projections showed that 16 of 18 policymakers expected at least one further hike this year. Futures markets indicated an 85% chance of at least one increase by December.
Asian currencies react to China and Singapore data
The Japanese yen's USD/JPY pair ticked down 0.1%, while the Australian dollar's AUD/USD pair rose 0.3%. The Indian rupee's USD/INR pair traded largely flat after rebounding sharply from a near-record low on the Reserve Bank of India's broad package of foreign exchange measures.
In China, consumer inflation edged up to 0.9% year-on-year in September from 0.8% in August, missing forecasts for 1.0%. Producer prices rose 5.0%, their fastest pace since June 2022.
However, Chinese exports surged 36.3% in U.S. dollar terms from a year earlier, far exceeding forecasts for 25.5% growth. Imports rose 31.0%, and the trade surplus widened to $133.53 billion, although questions over the strength of domestic demand remain.
The Singapore dollar weakened slightly after the Monetary Authority of Singapore unexpectedly left its exchange-rate policy settings unchanged, defying expectations for a further modest tightening. Singapore's economy grew 5.4% year-on-year in the third quarter, slowing from 6.2% in the previous quarter but beating expectations of 5.1%.
Source: Investing.com
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