Sentiment towards Asian markets also remained largely weak following middling economic signals from China. The region’s largest economy set a 2024 gross domestic product target of 5%, the same as 2023, and offered scant cues on more policy support for the economy.
The Chinese yuan fell slightly and was close to breaking above the 7.2 level.
The Japanese yen firmed slightly below the 150 level, seeing some safe haven plays as broader financial markets, particularly stocks, tumbled on Tuesday. Focus was also on when the Bank of Japan could potentially begin raising interest rates.
The Australian dollar was among the better performers for the day, rising nearly 0.2% as data showed fourth-quarter GDP grew as expected.
The reading showed that strong government and capital spending helped offset a sharp decline in personal consumption. But this trend is expected to wear thin in the coming months, with slowing consumption likely to put more pressure on the economy.
Slowing consumption also heralds more declines in inflation- a scenario that could eventually see the Reserve Bank trim interest rates.
Commonwealth Bank of Australia (OTC:CMWAY) analysts said on Wednesday that they expect the RBA to cut rates by 75 basis points in 2024- a scenario that bodes poorly for the Australian dollar.
Other Asian currencies kept to a tight range on Wednesday. The South Korean won fell 0.1% even as consumer inflation read hotter than expected for February.
The Singapore dollar was flat, as was the Indian rupee.
The dollar index and dollar index futures both moved little in Asian trade on Wednesday after falling from three-month highs over the past two weeks.
Focus was squarely on a two-day testimony from Federal Reserve Chair Jerome Powell, who is widely expected to maintain his hawkish rhetoric on interest rates.
Powell’s testimony also comes after a chorus of Fed officials warned that the bank was in no hurry to cut interest rates in the face of sticky inflation.
Still, traders largely maintained their bets on a 25 basis point cut in June, according to the CME Fedwatch tool.
Beyond Powell, nonfarm payrolls data for February is also on tap this week.
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