Asian currencies mixed as dollar steadies after Fed hold, PCE eyed

Investing.com -- Asian currencies traded mixed on Thursday as the U.S. dollar steadied after the Federal Reserve held interest rates unchanged, with investors awaiting fresh U.S. inflation data and upcoming policy decisions in Europe and Japan. The Japanese yen edged higher ahead of the Bank of Japan's Friday decision, while the New Zealand dollar remained under pressure after an unexpected rate hold by its central bank a day earlier. The Japanese central bank is expected to leave its policy rate unchanged at 1.25% after raising it last month.

The U.S. dollar index slipped marginally to 102.17, after the greenback retreated from a two-week high following Fed Chair Kevin Warsh's press conference. The euro and the sterling traded little changed.

The USD/JPY pair fell marginally by 0.1% to 157.76, leaving the yen slightly firmer against the dollar. The Australian dollar traded at $0.7055, while the New Zealand dollar was at $0.5622.

Fed holds rates as PCE data takes focus

The Federal Reserve kept its policy rate unchanged at 3.75%-4.00% in a 10-2 vote on Wednesday, while upgrading its assessment of economic growth to describe activity as expanding at a strong pace.

The decision put further changes to borrowing costs on hold as policymakers await more evidence on inflation, with the next meeting coming after next week's U.S. midterm elections.

Warsh expressed confidence that inflation could return to the Fed's 2% target without significantly slowing economic growth or pushing unemployment higher. His press conference offered little clarity on whether another increase would come in December, prompting traders to reduce expectations for rate hikes in 2027.

Markets are still pricing in a 78% probability of a December rate hike, according to the CME FedWatch tool.

Investors now turn to September's personal consumption expenditures price index, due later Thursday, for fresh clues on the outlook for rates.

Traders are also awaiting the ECB's policy announcement later on Thursday, where it is widely expected to keep its deposit rate unchanged at 2.50%.

Kiwi stabilizes after RBNZ surprise, Aussie tracks inflation

The New Zealand dollar steadied at $0.5622, down 0.1%, after tumbling as much as 1.7% to around $0.5585 on Wednesday. The sharp decline followed the Reserve Bank of New Zealand's unexpected decision to keep its official cash rate at 2.75%, contrary to market expectations. 

The Australian dollar traded at $0.7055, near a one-month high, after quarterly inflation data showed consumer prices rose 1.3% in the third quarter, accelerating from 0.6% in the previous quarter.

Reserve Bank of Australia Governor Michele Bullock told lawmakers the central bank would assess at next week's policy meeting whether the four rate increases delivered this year would be sufficient to return inflation to target. 

Regional moves were uneven. The USD/CNH pair and the USD/CNY pair were little changed. The USD/KRW pair dropped 0.6% to 1,333.51, indicating a stronger South Korean won.

Elsewhere, the USD/SGD pair traded flat, while the USD/INR pair rose 0.07% to 95.290 and the USD/THB pair gained 0.16% to 33.744. The USD/TWD pair rose 0.5% to 32.554, pointing to a weaker Taiwan dollar.