Asian currencies: Chinese yuan climbs to a 34-month peak, while the Japanese yen strengthens amid expectations of a BOJ rate hike.

Most Asian currencies traded in a tight range on Thursday as lingering uncertainty over U.S. trade policy kept sentiment cautious, though the Chinese yuan and Japanese yen stood out on domestic drivers.

The US Dollar Index slipped 0.1% during Asian trading hours, with its futures also down 0.1% as of 00:22 ET (05:22 GMT).

Chinese yuan surges to 34-month high on policy hopes

China’s onshore yuan strengthened, with USD/CNY sliding 0.5% to a new 34-month low of 6.834 ahead of the country’s annual parliamentary session, the National People’s Congress. Markets are betting on fresh policy backing as investors look for growth targets and potential fiscal stimulus signals that will shape Beijing’s economic agenda for the year.

The offshore yuan also advanced, with USD/CNH touching its weakest level since mid-April 2023.

Elsewhere in the region, currencies were mostly subdued as concerns over U.S. tariffs persisted. President Donald Trump’s 10% global tariffs came into force earlier this week, with plans underway to raise them to 15%.

The South Korean won was little changed after the Bank of Korea kept its benchmark rate steady at 2.5%, in line with expectations. The Singapore dollar edged 0.1% higher against the greenback, while the Indian rupee gained 0.1%. The Australian dollar rose 0.2%.

Yen rebounds on BOJ rate hike expectations

The Japanese yen strengthened, with USD/JPY falling 0.4%, after Kazuo Ueda, Governor of the Bank of Japan, said policymakers would carefully assess incoming data at their March and April meetings, leaving room for another rate hike if inflation and wage growth remain solid.

His comments bolstered expectations that Japan will stay on a gradual path toward policy normalization.

The yen had weakened a day earlier following reports that Prime Minister Sanae Takaichi adopted a cautious stance on further tightening and after two more dovish-leaning members were nominated to the BOJ board.

Analysts at ING said the addition of new board members would broaden the range of views in policy discussions, though no single perspective is likely to dominate. They added that a June rate hike appears more likely than one in April, pending confirmation of strong spring wage gains and April inflation data.

Sources: Ayu Oha