Asia-Pacific Markets React to RBNZ Decision, China Inflation Data, and USD Strength Amid Trump Tariff Talk
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The Asia-Pacific currency markets saw mixed reactions on Tuesday as traders digested key economic updates, including the Reserve Bank of New Zealand's (RBNZ) rate decision, China's latest inflation figures, and a strengthening US dollar fueled by renewed tariff speculation from former President Donald Trump.
The RBNZ held its official cash rate steady at 5.5%, as widely expected, marking the eighth consecutive pause. Policymakers maintained a cautious stance, noting that inflation remains stubbornly above target despite signs of easing domestic demand. The New Zealand dollar (NZD) initially dipped before recovering, reflecting market uncertainty about the timing of future rate cuts.
China reported a 0.3% year-on-year rise in consumer prices (CPI) for June, slightly above forecasts and marking the fifth straight month of inflation. However, producer prices (PPI) fell 0.8%, underscoring persistent deflationary pressures in the industrial sector. The data did little to shift expectations for further stimulus from Beijing, leaving the yuan stable against the dollar.
The US dollar gained broadly in Asian trading, particularly against risk-sensitive currencies like the Australian dollar, after Trump suggested in a campaign speech that he might impose tariffs of more than 60% on Chinese imports if re-elected. Analysts noted the comments reignited concerns about global trade tensions, benefiting the greenback as a haven.
Japanese yen weakness remained a focal point, with USD/JPY hitting fresh 38-year highs above 161.50 despite repeated warnings from Japanese officials about potential intervention. Market participants appear to be testing Tokyo's resolve as the interest rate gap between Japan and the US continues to weigh on the currency.
Regional equities were mostly lower, with Australia's ASX 200 and Japan's Nikkei 225 both down about 0.5% amid the stronger dollar and renewed trade worries. Gold prices held near three-week highs as the mixed signals supported some safe-haven demand.
