U.S.–Iran talks approach as Palo Alto Networks gets set to release earnings, drawing market attention.

Most Asian currencies slipped on Friday as investors weighed a mixed interest rate outlook across the region. The Australian dollar was on track for a solid monthly gain, while the Japanese yen remained under pressure.

The Chinese yuan declined after Beijing lowered a key reserve requirement to make dollar purchases cheaper domestically, though the currency continued to hover near three-year highs.

Meanwhile, the dollar index and dollar index futures edged down about 0.1% in Asian trading. Despite the dip, the greenback was up 0.7% for February, supported by safe-haven demand and lingering uncertainty over the direction of interest rates.

Japanese yen subdued after weak Tokyo CPI, February decline in focus

The Japanese yen saw the USD/JPY pair slip 0.2% on Friday and was on track to gain 0.7% for February.

Pressure on the yen intensified as uncertainty grew over the timing of the Bank of Japan’s next interest rate hike. Those doubts deepened following softer-than-expected consumer price index data from Tokyo for February.

The reading—often viewed as a leading indicator for nationwide inflation—showed core CPI falling below the BOJ’s 2% annual target for the first time in nearly four years, potentially complicating the central bank’s plans for further rate increases.

The yen had weakened earlier in February amid concerns about the fiscal implications of Prime Minister Sanae Takaichi’s proposed stimulus measures and tax cuts. However, she appeared to gain momentum for advancing her fiscal agenda after her ruling coalition secured a supermajority in Japan’s lower house of parliament.

Chinese Yuan slips after PBOC lowers FX risk reserve ratio

The Chinese yuan’s USD/CNY pair rose 0.2% on Friday after the People’s Bank of China removed a key foreign exchange risk reserve requirement for certain forward contracts—a step that makes dollar purchases cheaper domestically.

The move follows a strong rally in the yuan against the dollar in recent months, partly fueled by exporters offloading the greenback amid a robust trade surplus with the United States.

However, rapid appreciation of the yuan can weigh on Chinese exporters by shrinking returns on overseas sales. Friday’s decision suggests the central bank may be aiming to curb further strength in the currency.

The yuan had approached a three-year high on Thursday before pulling back.

Australian dollar set for February gains on hawkish RBA outlook

The Australian dollar’s AUD/USD pair climbed 0.25% on Friday, ranking among Asia’s top performers for the month.

The Aussie was on track to advance 2.3% in February, largely supported by a more hawkish stance from the Reserve Bank of Australia. The central bank raised interest rates by 25 basis points earlier in the month and signaled it would tighten further if inflation fails to ease.

Stronger-than-expected January CPI data released this week reinforced expectations that the RBA could deliver additional rate hikes.

Elsewhere in the region, most Asian currencies edged lower on Friday. The South Korean won’s USD/KRW pair ticked up slightly but remained down 1.3% for February.

The Indian rupee’s USD/INR pair steadied after climbing back above the 91-per-dollar mark, though it was still 0.8% weaker this month, despite gaining support from a U.S.–India trade agreement.

Meanwhile, the Singapore dollar’s USD/SGD pair was little changed on the day and down 0.7% for February.

Sources: Ambar Warrick