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Asia FX Remains Subdued Ahead of Fed Minutes; NZD Surges on Hawkish RBNZ

On Wednesday, most Asian currencies maintained a narrow range as the dollar stabilized, awaiting further signals on U.S. interest rates from the Federal Reserve’s recent meeting minutes.


A notable exception was the New Zealand dollar, which surged after the Reserve Bank of New Zealand (RBNZ) struck a somewhat hawkish tone in its May meeting.


However, despite the positive performance of the Kiwi, cooling optimism regarding China and concerns about sustained high U.S. interest rates kept most regional currencies trading within a tight range. Additionally, cautious statements from Fed officials overnight contributed to subdued sentiment.


Kiwi Soars as RBNZ Signals Delay in Rate Cuts

The New Zealand dollar, represented by the NZDUSD pair, experienced a significant surge of up to 0.9% to reach an over two-month high on Wednesday. This surge followed the RBNZ’s indication of potential delays in implementing interest rate cuts due to persistent inflation.

While the RBNZ kept its official cash rate unchanged as widely expected, it highlighted the impact of sticky inflation, particularly driven by tight labor conditions and high service prices. Traders responded by pricing in potential rate cuts later in 2025. Despite acknowledging a slowdown in inflation, the RBNZ expressed confidence that price pressures would eventually fall within its 1% to 3% target range by the end of 2024.

Dollar Holds Steady, Asia FX Muted Ahead of Fed Minutes

In Asian trading, the dollar index and dollar index futures stabilized after registering some gains overnight. Despite still recovering from losses incurred last week, the greenback regained some ground this week as Fed officials emphasized the need for greater confidence before considering rate adjustments.

Market participants awaited the release of the minutes from the Fed’s late-April meeting for further insights into the central bank’s stance.

Meanwhile, most Asian currencies remained stagnant, with the Japanese yen showing persistent weakness against the dollar and the Chinese yuan maintaining its position close to a six-month high as traders awaited cues on Beijing’s stimulus initiatives and economic performance.

Other Market Movements

The Australian dollar and South Korean won exhibited little movement, with key economic data releases scheduled for the following day.

However, market holidays in Singapore, Malaysia, and Thailand resulted in subdued trading volumes across Southeast Asia.