The dollar was steady in Asian trading on Wednesday after weak U.S. jobs data reinforced expectations that the Federal Reserve will cut interest rates at its September 16-17 policy meeting.

The market is generally betting on a 25 basis point rate cut, with only a very small number of investors believing that a more aggressive move of 50 basis points is possible.

Market attention is focused on the upcoming release of producer and consumer price index data, which will determine whether the path of interest rate cuts needs to be extended further, especially the impact of the recent US tariff policy on price levels.

"For the Fed to opt for a 50 basis point rate cut, it would require a significant downturn in core inflation," said Kieran Williams, head of Asian FX at InTouch Capital Markets. "However, a significant rate cut is unlikely due to the stickiness of service sector prices and the Fed's gradualist stance."

Data showed the U.S. economy created about 911,000 fewer jobs in the year to March than previously estimated. This revision suggests the labor market was already showing signs of weakness before the tariffs hit. However, investors believe such data is lagging and has had little impact on market expectations for rate cuts.

Matt Simpson, senior market analyst at City Index, noted: "If we hastily cut interest rates by 50 basis points now, it may damage market confidence. The Fed is more likely to choose to stay consistent with the market's existing expectations of three rate cuts rather than overly cater to political pressure."

In currency markets, the dollar index was steady around 97.834, having risen 0.3% the previous day but down about 10% since 2025. The euro hovered around $1.1698, the pound was at $1.3522, and the yen held steady around 147.42. The Australian dollar was near a seven-week high of $0.6587.

Global political developments are also impacting market sentiment. Japan faces uncertainty over leadership transitions, while France has seen frequent prime ministerial changes due to fiscal issues. Among emerging markets, Indonesian financial markets are experiencing significant volatility.

The Indonesian rupiah plunged 1% on Tuesday following the unexpected dismissal of Finance Minister Sri Mulyani Indrawati, long seen as key to balancing Indonesia's fiscal discipline and growth policies, and her departure has stoked investor concerns.

"The risk of loosening fiscal policy is increasing, and without a credible policy anchor, the rupiah will remain under pressure, even if the central bank's foreign exchange reserves provide some cushion," said InTouch's Williams.

Editor's Note: The dollar's current trajectory is constrained by upcoming inflation data, with a weak job market and price uncertainty stemming from tariffs as key variables. A 25 basis point rate cut by the Federal Reserve is highly likely, but a larger cut would require significant data surprises.

For the market, the uncertainty of the monetary policy path coupled with the political risks in emerging markets will significantly increase foreign exchange volatility in the coming weeks.