Asian FX markets were generally muted on Wednesday, responding to softer U.S. inflation data which tempered rate-cut expectations following recent trade agreements between the U.S. and China.

The Federal Reserve’s rate path is under close scrutiny. The recent CPI data showed only a 2.3% year-over-year increase, which was lower than the expected 2.4%. Analysts suggest that while trade de-escalation fosters growth, it may limit the Fed’s scope for cutting rates significantly.

Meanwhile, the Japanese yen has shown strength amid speculation that the Bank of Japan will tighten policies soon. The divergence in policies between the Fed and BOJ could lead to varied currency movements in the region.

Market participants must remain vigilant to shifts influenced by central bank announcements or further developments in trade relationships. Active monitoring will be critical in navigating future FX movements across Asia.