Investing.com-- Most Asian currencies firmed on Thursday as risk appetite was boosted by U.S. President Donald Trump talking up a Russia-Ukraine peace treaty, although traders still remained on edge over sticky U.S. inflation.
The dollar retreated on increased safe haven demand, taking little support from stronger-than-expected consumer price index inflation data, which pointed to interest rates remaining steady for longer.
Safe haven bids like the Japanese yen also weakened, with the currency taking little support from stronger-than-expected producer price index inflation data. The USD/JPY pair steadied after rising sharply in overnight trade.
The Chinese yuan was flat, with the USD/CNY pair hovering around 7.3 yuan. The Wall Street Journal reported that Beijing had offered to host a peace summit for Russia-Ukraine talks.
Trump talks up Russia-Ukraine peace treaty
Trump said on Thursday that he held individual calls with Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskiy, where they both expressed a desire for peace.
The U.S. President said he had instructed top officials to begin peace talks.
This came after U.S. Defense Secretary Pete Hegseth said Ukraine will no longer seek membership in the NATO alliance, or attempt to reclaim territory seized by Russia.
The move ratcheted up hopes that an end to the nearly three-year war- which disrupted global trade and sparked a European energy crisis- was in sight.
This pushed up risk appetite, with Asian stock markets also clocking gains.
The Australian dollar- an indicator of regional risk appetite- firmed, with the AUD/USD pair adding 0.1%.
The South Korean won’s USD/KRW pair fell 0.2%, while the Singapore dollar’s USD/SGD pair rose nearly 0.3%.
The Indian rupee’s USD/INR pair fell 0.1%, extending a sharp decline from earlier this week after the Reserve Bank seemingly intervened in currency markets to rescue the rupee from record lows against the dollar.
Dollar sinks as improved risk appetite offsets strong CPI
The dollar index and dollar index futures fell 0.4% and 0.3%, respectively, extending steep overnight declines.
The greenback- which also acts as a safe haven- was hit by improving risk appetite in the wake of Trump’s Russia-Ukraine comments.
This saw the dollar take little support from stronger-than-expected CPI data, which showed U.S. inflation remained sticky, diminishing the chances of more interest rate cuts.
A testimony from Federal Reserve Chair Jerome Powell furthered this notion, with high rates likely to underpin the dollar and pressure Asian markets in the long-term.
The dollar is also expected to benefit from Trump’s tariff agenda. The greenback clocked strong gains over the past week after Trump imposed steep tariffs on metal imports, and threatened more duties.