Most Asian currencies fell on Monday as U.S. actions against Venezuela unsettled markets, while the Japanese yen weakened despite the Bank of Japan signaling potential further interest rate hikes.
The U.S. dollar gained from heightened safe-haven demand following Washington’s intervention in Venezuela and the capture of President Nicolas Maduro. U.S. President Donald Trump declared that the U.S. would maintain control over Venezuela until a new leader is chosen.
Meanwhile, the Chinese yuan stood out by holding firm at its strongest level in two and a half years. This strength came after Beijing announced additional stimulus measures in late December. Moderate services activity data did little to slow the yuan’s rise, supported by a series of robust midpoint fixes from the People’s Bank of China.
Dollar boosted by safe-haven buying in wake of Venezuela action
The dollar index and its futures each climbed about 0.3% during Asian trading, driven by increased safe-haven demand amid rising geopolitical tensions.
Over the weekend, the U.S. reportedly transported Nicolás Maduro to New York, where he is expected to face legal proceedings.
President Trump also issued threats toward other nations opposing U.S. policies, including Colombia and Iran, and reiterated his calls for the U.S. to take control of Greenland.
This military move, combined with Trump’s remarks, heightened global geopolitical uncertainty. Analysts cautioned that Washington’s actions might set a precedent for other major powers like China and Russia.
Japanese yen continues to weaken despite BOJ rate hike signals
The Japanese yen slipped further on Monday, with the USD/JPY pair rising 0.2%, hovering near levels last seen in early 2025.
The yen’s weakness persisted even after BOJ Governor Kazuo Ueda reaffirmed that the central bank would continue raising interest rates as economic and inflation targets align with forecasts.
However, Ueda’s remarks largely echoed the message from the BOJ’s December meeting, when rates were increased by 25 basis points.
The yen remained under pressure, with USD/JPY trading within ranges that have historically prompted government intervention. Yet, traders questioned Tokyo’s capacity for further currency market intervention amid growing concerns over the country’s expanding fiscal deficit.
Chinese yuan hits 2½-year high on stimulus optimism
The Chinese yuan stood out as the USD/CNY pair extended recent declines, dropping 0.2% to its lowest level since May 2023.
The yuan’s strength was driven by Beijing’s announcement of additional stimulus measures aimed at boosting consumer spending. In late December, the government unveiled a 62.5 billion yuan ($8.94 billion) program to extend subsidies on consumer electronics and other goods.
Additionally, the People’s Bank of China supported the yuan by setting a series of strong daily midpoint rates, further reinforcing the currency’s gains.
Private purchasing managers index (PMI) data showed that growth in China’s services sector slowed slightly in December, though it remained in expansion for the third consecutive year.
Meanwhile, broader Asian currencies weakened as U.S. actions in Venezuela dampened risk appetite. The Australian dollar (AUD/USD) declined nearly 0.2%, while the South Korean won (USD/KRW) rose 0.4%.
The Taiwan dollar (USD/TWD) remained flat, whereas the Singapore dollar (USD/SGD) gained 0.2%.
The Indian rupee (USD/INR) strengthened by 0.1%, firming back above the 90-rupee level.
Sources: Investing
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