Anna 
Asian currencies showed modest gains on Wednesday, rebounding against a weakened dollar as investors awaited crucial U.S. inflation figures that could influence interest rate decisions.
Traders are increasingly confident that the Federal Reserve will refrain from further interest rate hikes in 2024, following remarks by Chair Jerome Powell on Tuesday. This sentiment contributed to dollar weakness, despite upbeat factory inflation data for April.
Although most regional currencies have suffered notable losses against the dollar in recent months, largely due to reduced expectations of interest rate cuts in 2024, they saw a slight recovery in the current trading session.
The dollar index and dollar index futures slipped in Asian trade on Wednesday, extending losses from the previous session, even as producer price index data exceeded expectations. Powell’s comments regarding monetary policy’s effectiveness in curbing inflation were key drivers of the dollar’s decline. However, he also cautioned that inflation may persist longer than anticipated, dampening market sentiment.
Investors are particularly wary of the forthcoming consumer price index (CPI) report for April, with any signs of persistent inflation likely reducing expectations of rate cuts and strengthening the dollar further, posing challenges for Asian markets.
In currency markets, the Chinese yuan’s USDCNY pair declined slightly despite U.S. tariffs targeting key Chinese sectors, potentially reigniting trade tensions between the world’s largest economies.
The Japanese yen’s USDJPY pair saw a modest decline but remained above the 156 yen level amid concerns of further government intervention in currency markets, particularly following recent interventions around the 160 yen mark.
Attention this week also focuses on Japan’s first-quarter gross domestic product (GDP) data scheduled for release on Thursday.
Meanwhile, the Australian dollar’s AUDUSD pair rose despite weaker-than-expected wage growth data for the first quarter. The Indian rupee’s USDINR pair remained relatively stable after pulling back from recent highs, while the Singapore dollar’s USDSGD pair recorded a slight decline.
