The USD currency index recovered to near a one-month high after the release of US CPI data that matched market expectations, bolstering hopes that the Fed will maintain a neutral tone at the January FOMC meeting.
At 10 am, the US Dollar Index (DXY) was at 99.240 points, up 0.07% since it opened in early trading Wednesday in the Asian session.
Global central bankers and CEOs of major banking institutions on Wall Street were seen in a row expressing support for Federal Reserve (Fed) Chairman Jerome Powell on Tuesday.
The support reflects a broad consensus among policymakers and the financial community that the Fed's independence is a critical element in maintaining economic stability and the credibility of US monetary policy.
Any political intervention has the potential to trigger higher inflation risks, rising government financing costs and more significant uncertainty in economic activity.
Financial markets remain cautious, with investors seen in no hurry to draw conclusions following current developments. This cautious approach reflects confidence that the Fed's independence will continue to be maintained.
Meanwhile, US economic data showed that the Consumer Price Index (CPI) rose 0.3% in December from the previous month, driven by increases in rent and food prices.
The increase came after the effects of the government shutdown-related disruptions that had temporarily depressed inflation in November ended.
The development reinforced market expectations that the Fed would keep interest rates at current levels this month.
Fed funds futures now show an implied probability of more than 95% that the US central bank will keep interest rates unchanged at its two-day meeting on January 28.
Meanwhile, the market assessed that pressure on the Fed's independence is not expected to have a major impact on US financial markets as long as inflation remains contained and the direction of monetary policy remains data-driven.
In the Asian region, volatility in most currency pairs was reported to be low in early trade, ahead of a possible US Supreme Court ruling on the validity of emergency tariffs introduced by President Donald Trump.
The US Treasury market, meanwhile, continues to show high resilience, with investors seen as less affected by political and legal developments, as long as economic fundamentals remain stable.
