Most Asian currencies traded within narrow ranges on Tuesday, while the U.S. dollar weakened as President Donald Trump’s renewed demands over Greenland dampened appetite for U.S. assets.
Regional markets showed little response to China’s decision to keep a key lending rate unchanged, as expected, while the Japanese yen was steady after Prime Minister Sanae Takaichi called a snap election for early February.
A U.S. market holiday on Monday limited overnight signals, leaving Asian markets broadly risk-averse after President Trump announced tariffs on Europe over Greenland over the weekend.
Japanese yen little changed ahead of snap vote and BOJ meeting
The Japanese yen weakened slightly on Tuesday, with USD/JPY slipping 0.1%, though the pair remained near recent highs amid a lack of strong supportive signals for the currency. Prime Minister Sanae Takaichi said on Monday that she will dissolve Japan’s lower house this week and call a snap election for February 8.
With Takaichi enjoying solid approval ratings, the early election is expected to strengthen her mandate for additional fiscal stimulus. However, markets questioned the scope for further government spending, as Japanese government bonds extended their selloff, which in turn pressured the yen.
The election announcement also comes ahead of a Bank of Japan policy meeting on Friday, with investors divided over whether the central bank has sufficient momentum to raise interest rates again.
The central bank raised interest rates at its final meeting of 2025 and signaled that further hikes would be driven by sustained gains in inflation and wages. However, the BOJ may pause before tightening again until it gains clearer insight into Japan’s spring wage negotiations, scheduled for March–April.
Dollar under pressure as Trump–Greenland tensions persist
The dollar index and its futures slipped about 0.1% in Asian trading, as the greenback faced pressure from growing caution toward U.S. assets amid President Trump’s push to acquire Greenland.
European leaders largely rejected Trump’s tariff threats and reiterated that Greenland should remain part of the Kingdom of Denmark. Trump on Monday renewed his demands for the island and declined to rule out the use of military force.
The U.S. president is now set to attend the World Economic Forum in Davos, Switzerland, where he may hold discussions with European leaders on the Greenland issue. Asian currencies remained mostly subdued amid broader risk aversion linked to Trump’s Greenland stance.
The Chinese yuan saw USD/CNY edge slightly lower, showing little response to the People’s Bank of China’s decision to leave its loan prime rate unchanged. The currency, however, stayed near its strongest levels in two and a half years after a series of firm midpoint fixings by the PBOC. Elsewhere, USD/TWD rose 0.3%, while AUD/USD gained 0.3%, with the Australian dollar supported by the softer U.S. dollar.
The South Korean won weakened slightly, with USD/KRW rising 0.2%, while the Singapore dollar also softened as USD/SGD added 0.1%. The Indian rupee saw USD/INR edge up 0.1% and hover near the 91-per-dollar level, as growing concerns over the health of India’s economy weighed on the currency.
Sources: Investing
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