The offshore yuan depreciated to around 6.80 per dollar on Wednesday, hitting its lowest level in a month, as a stronger US dollar continued to weigh on the currency. The greenback remained supported by mounting expectations that the Federal Reserve could raise interest rates in September, with markets now assigning roughly a 70% chance of a rate hike. Further pressure came from the People’s Bank of China, which continued to set the yuan’s daily reference rate at weaker-than-expected levels. The central bank fixed the currency at 6.8195 per dollar on Wednesday, extending its longest streak of weaker fixings since April 2025. Meanwhile, China has effectively halted certain tungsten exports to Japan, while rare-earth magnet shipments fell to a one-year low in May, when Beijing first rolled out its global export-control regime. Such restrictions have remained in place amid tensions over Taiwan-related remarks by Japanese Prime Minister Sanae Takaichi.
Indian Rupee Slides to One-Week Low
The Indian rupee fell to around 94.8 per dollar, retreating after a brief stabilization as renewed strength in the greenback and shifting expectations for US monetary policy overshadowed lower crude oil prices. The currency came under renewed pressure after the dollar index climbed to its highest level in more than a year, driven by growing market expectations that the Federal Reserve could implement one or two additional interest-rate hikes before the end of the year. The rupee’s decline was partly cushioned by a sharp drop in oil prices, with Brent crude falling below $77 per barrel and posting losses of roughly 16.5% for the month. The decline in energy prices has been supported by signs that tanker movements through the Strait of Hormuz are gradually returning to normal. Additional support came from improving capital-flow dynamics. Foreign investment into Indian debt markets has strengthened, while equity-market outflows have moderated compared with earlier months.
New Zealand Dollar weakens as US Dollar rises on Middle East risks, firm US data
- NZD/USD weakens as a complex Middle East situation sparks risk aversion.
- Trump claimed Iran agreed to nuclear inspections, but Iran countered that real negotiations have not yet started.
- Markets widely expect the RBNZ to hike its Official Cash Rate by 25 basis points to 2.5% in July.
NZD/USD continues its losing streak for the sixth consecutive day, trading around 0.5660 during the Asian hours on Wednesday. The pair weakens as the US Dollar (USD) gains ground in a highly complex geopolitical landscape.
Traders are carefully navigating conflicting signals regarding a potential United States (US)-Iran diplomatic breakthrough. While US President Donald Trump stated that Iran had “fully and completely” agreed to open its facilities to nuclear inspections, Iranian Foreign Minister Abbas Araghchi quickly tempered expectations by clarifying that substantive nuclear negotiations have not actually begun.
Additionally, Iran’s chief negotiator issued a stern warning that the strategic Strait of Hormuz will never return to its pre-war status and will remain firmly under Iranian oversight. Meanwhile, diplomatic efforts showed signs of progress elsewhere as Washington hosted a fresh round of talks between Israel and Lebanon, aimed at securing a ceasefire with Iran-backed Hezbollah.
The US Dollar also received support from strong macroeconomic indicators that reinforced the narrative of “US exceptionalism.” June’s flash estimate for the US S&P Global Composite Purchasing Managers’ Index (PMI) climbed to 52.2, comfortably beating May’s reading of 51.5 and signaling healthy business expansion.
The US manufacturing sector showed remarkable resilience, with output jumping to 55.7 from the previous month’s 55.1, easily outperforming forecasts of 54.8. Simultaneously, the Services PMI printed at 51.3, ticking up from May’s 50.7 and clearing the consensus estimate of 51.0, proving that demand in the broader service economy remains incredibly sticky.
On the other side of the ledger, the Reserve Bank of New Zealand (RBNZ) is widely expected to raise its Official Cash Rate (OCR) by 25 basis points to 2.5% in July. These hawkish RBNZ expectations are strongly backed by accelerated inflationary pressures within the domestic economy. This policy outlook gained further traction after first-quarter Consumer Price Index (CPI) data remained steady at a stubborn 3.1%, keeping the pressure on New Zealand policymakers to act.
Australian Dollar bulls seem hesitant on mixed CPI data; hangs near April lows vs USD
- AUD/USD edges higher following the release of Australian consumer inflation figures for May.
- Bulls, however, seem hesitant amid expectations that the RBA will hold interest rates steady.
- The USD climbs to an over one-year high on hawkish Fed expectations and further caps the pair.
The AUD/USD pair attracts some buyers following the release of softer Australian consumer inflation figures during the Asian session on Wednesday and reverses a part of the previous day’s slump to the 0.6900 mark, or its lowest level since early April. Spot prices currently trade around the 0.6920-0.6925 region, though any meaningful recovery seems elusive amid a bullish US Dollar (USD).
The Australian Bureau of Statistics (ABS) reported that the headline Consumer Price Index (CPI) unexpectedly eased from 4.2% YoY to 4% in May. Adding to this, the monthly CPI fell more-than-expected, by 0.7% during the reported month, following a 0.4% growth recorded in April. The softer readings, however, were offset by the Trimmed Mean CPI, which rose 0.4% on a monthly basis and picked up slightly from the 3.4% to the 3.6% YoY rate in May.
The initial market reaction, however, turns out to be muted as the US-Iran peace deal has eased concerns about the energy shock, endorsing the view that the Reserve Bank of Australia (RBA) will hold rates steady in the coming months. This, in turn, holds back traders from placing aggressive bullish bets around the Australian Dollar (USD). Apart from this, the prevalent USD buying interest further contributes to capping the upside for the AUD/USD pair.
The USD Index (DXY) has advanced to a fresh high since May 2025 amid expectations for a rate hike by the US Federal Reserve (Fed). In fact, traders upped their bets that the US central bank will raise borrowing costs by at least 25-basis-points (bps) by the year-end following the Fed’s surprisingly hawkish turn last week. This offsets the optimism over the US-Iran peace deal and might continue to underpin the USD, warranting caution for AUD/USD bulls.
Australian Dollar steadies vs Japanese Yen as CPI cools, BoJ hawks
- AUD/JPY experiences volatility amid cooling Australian inflation.
- Australia’s annual CPI rose 4.0% while monthly prices fell 0.7%, both slowing much faster than markets expected.
- JPY defense prompts government intervention and rate hike momentum, highlighting building pressures for a tighter monetary policy.
AUD/JPY remains steady after six days of losses, trading around 0.6920 during the Asian hours on Wednesday. The currency cross moves little as the Australian Dollar (AUD) experiences minor volatility following the release of Australia’s Consumer Price Index (CPI) data.
Australian inflation slowed more than anticipated in May, offering some relief to policymakers. According to the Australian Bureau of Statistics, the annual Consumer Price Index (CPI) rose by 4.0% year-over-year, down from 4.2% in the previous month and lower than the 4.4% market consensus. On a monthly basis, consumer prices actually fell by 0.7%, a sharp reversal from the prior month’s 0.4% increase and a softer reading than the forecasted 0.3% decline. Meanwhile, the Reserve Bank of Australia’s (RBA) preferred core inflation metric, the Trimmed Mean CPI, ticked up 0.4% for the month and rose 3.6% on an annual basis.
Over in Japan, momentum is building for tighter monetary policy just as government officials step up warnings to protect a weakening Japanese Yen (JPY). Japan’s Chief Cabinet Secretary Minoru Kihara stated that authorities will take appropriate action against excessive foreign exchange volatility if necessary. This stance was underscored by a high-level call between Japanese Finance Minister Satsuki Katayama and US Treasury Secretary Scott Bessent, keeping the market on high alert for official Yen-buying operations.
The Bank of Japan’s (BoJ) Summary of Opinions from its June meeting showed that a majority of board members supported raising the policy interest rate, noting that inflation risks are broadening and the underlying CPI is sustainably approaching its 2% target.
As a result of these conflicting forces, the upside for the AUD/JPY cross remains firmly capped. The combination of cooling Australian inflation, which dampens the need for higher RBA rate hikes, and heightened fears of direct currency intervention by Japanese authorities has prompted traders to handle the currency cross with extreme caution.
Canadian Dollar strengthens despite hawkish Fed expectations
- USD/CAD softesn to near 1.4205 in Wednesday’s Asian session.
- Iran’s Pezeshkian said no negotiation on ballistic missiles.
- Traders raise their bets on a US rate hike this year.
The USD/CAD pair edges lower to around 1.4205 during the Asian trading hours on Wednesday. Nonetheless, the potential downside for the pair might be limited amid rising expectations of a Federal Reserve (Fed) rate hike this year. The US May Personal Consumption Expenditures (PCE) Price Index (PCE) data will take center stage later on Thursday.
Iran’s President Masoud Pezeshkian said on Tuesday that Tehran’s ballistic missile program will not be included in negotiations with the United States (US), per BBC.
US President Donald Trump rebuffed Iran’s claim that no visit has been scheduled for International Atomic Energy Agency (IAEA) inspectors, insisting Tehran had already agreed to the arrangement. Uncertainty surrounding US-Iran peace deal could support the US Dollar (US) against the Canadian Dollar (CAD).
Markets adjusted expectations for a more hawkish stance from the Fed, lifting the Greenback. Traders are now pricing in nearly a 86.1% chance of a Fed hike in December, up from 61% before last week’s FOMC meeting, according to the CME FedWatch tool.
The Bank of Canada (BoC) Governor Tiff Macklem said on Tuesday that global imbalances of financial flows, led by China’s export surplus and the reliance of the United States on foreign capital, and may be fuelling financial stability risks.”
The Loonie has been on the backfoot for several weeks with well-documented reasoning of widening yield differentials in favor of the USD, slowing growth, trade uncertainty or the uneasy status quo and a mostly asymmetric risk response to the Iran war,” said Amo Sahota, director at Klarity FX in San Francisco.
Swiss Franc slips to seven-month lows ahead of ZEW Survey Expectations
- USD/CHF reached a seven-month high of 0.8107 on Wednesday.
- The US Dollar rises due to robust domestic economic data alongside a complex, mixed geopolitical landscape.
- The SNB raised its inflation forecast and reaffirmed its readiness to intervene in forex markets to curb Franc strength.
USD/CHF extends its gains for the sixth successive day, reaching a seven-month high of 0.8107 during the Asian hours on Wednesday. The pair rises as the Greenback strengthens on the complex Middle East situation. Traders will likely observe the Swiss ZEW Survey – Expectations for June and the Q2 SNB Quarterly Bulletin due later in the day.
US President Donald Trump stated that Iran had “fully and completely” agreed to open its facilities to nuclear inspections, while Iranian Foreign Minister Abbas Araghchi quickly tempered expectations by clarifying that substantive nuclear negotiations have not actually begun.
Additionally, Iran’s chief negotiator issued a stern warning that the strategic Strait of Hormuz will never return to its pre-war status and will remain firmly under Iranian oversight. Meanwhile, diplomatic efforts showed signs of progress elsewhere as Washington hosted a fresh round of talks between Israel and Lebanon, aimed at securing a ceasefire with Iran-backed Hezbollah.
June’s flash estimate for the US S&P Global Composite Purchasing Managers’ Index (PMI) climbed to 52.2, comfortably beating May’s reading of 51.5 and signaling healthy business expansion. The US manufacturing sector showed remarkable resilience, with output jumping to 55.7 from the previous month’s 55.1, easily outperforming forecasts of 54.8. Simultaneously, the Services PMI printed at 51.3, ticking up from May’s 50.7 and clearing the consensus estimate of 51.0, proving that demand in the broader service economy remains incredibly sticky.
The CME FedWatch tool indicates that the markets adjusted expectations for a more hawkish stance from the Federal Reserve (Fed). Traders are now pricing in a nearly 86.1% chance of a Fed hike in December, up from 61% before last week’s FOMC meeting.
The Swiss National Bank (SNB) kept its policy rate at 0% for the fourth straight meeting in June, maintaining its current stance, which continues to support both price stability and economic growth. However, the central bank raised its inflation forecast and reaffirmed its readiness to intervene in the foreign exchange markets to curb the Franc’s strength.
Dollar Holds Firm on Rate Hike Expectations
The dollar index hovered around 101.4 on Wednesday, trading at its highest level in more than a year as expectations for Federal Reserve rate hikes this year remained strong, while a technology-led selloff on Wall Street boosted demand for the safe-haven currency. At its latest policy meeting, Fed officials left interest rates unchanged but signaled increasing support for further tightening, while new Fed Chair Kevin Warsh reiterated his commitment to restoring price stability. Markets are now pricing in roughly a 70% probability of a rate increase in September, up sharply from 29.1% a week earlier. Investors are also looking ahead to this week’s PCE inflation report, the Fed’s preferred inflation gauge, for additional clues on the outlook for monetary policy. Meanwhile, progress in US-Iran peace negotiations has increased traffic through the Strait of Hormuz, easing strains in global energy markets and helping to reduce inflationary pressures.
