USD Slipped as Fed Statement Reduced Inflation Concerns

On Tuesday morning in Asia, May 25, the USD slipped as the U.S. Federal Reserve officials released a statement easing investor’s concerns over inflation.

The U.S. Dollar index which trails the greenback in opposition to six other baskets of currencies fell 0.11% to 89.74.

USD/JPY was stable at 108.73. Japan has aforethought in extending its current state of emergency as its coronavirus cases continue to spike.

As of the moment, the U.S. State Department is reinforcing its travel advisory to level four in the Japanese peninsula.

Melbourne also restricted social gathering events as it deals with the COVID-19 cases surge in the country. Its currency exchange AUD/USD pair smashed 0.07% to 0.78.

The pair of NZD/USD also rose 0.14% to 0.72. The Reserve Bank of New Zealand is likely to release its policy decision on Wednesday.

Some investors are already laying down that the central bank may start to predict the rise in rates.

In addition, USD/CNY plummeted 0.10% to 6.41 while the GBP/USD pair climbed 0.17% to 1.42.

Lastly, USD/INR and USD/IDR were hugely flat at 72.86 and 14,345, respectively.

Even if the Indian rupee is outstripping 1.5% in May, there are no signs that the country’s coronavirus catastrophe will start to ease.

Elsewhere, the Bank of Indonesia is likely to release its policy rate later on Tuesday. They expect a data low of 3.5% to secure the rupiah.

Last week, it plunged 1.1%, which is its immense fall since February, amidst a fresh cue that the Federal Reserve will start viewing the layout of stimulus this year.

China Digital Yuan, Monitored by Fed

The Fed is closely monitoring China in its progress in developing a digital currency, most especially its operation on international payments.

Federal Reserve Gov. Lael Brainard said that it is important for the Fed to monitor a lot of central bank’s development on the Central Bank Digital Currency (CBDC), including China.

She added that the promulgation of a CBDC in one territory, especially to the scope that it is designed for public use in cross-border payments, potentially has a remarkable effect worldwide.

That is why the Fed needs to be updated in the development of any cross-board degree for central bank digital currencies.  

Even though the digital yuan is mainly aimed at the retail space, China is already preparing its capability to be used for some cross-country payments.