Most Asian currencies strengthened on Tuesday, following an overnight pullback in the dollar as its recent rebound lost momentum ahead of a batch of key U.S. economic data due this week. The Japanese yen edged higher, extending prior gains as fresh government warnings on possible market intervention supported the currency, offsetting concerns about heavier fiscal spending under Prime Minister Sanae Takaichi after her landslide election win. Regional FX benefited from the softer dollar, though advances were capped by investor caution ahead of upcoming U.S. data releases.
Dollar steadies after overnight drop, with payrolls and CPI in focus.
The dollar index was little changed in Asian trade after sliding about 0.7% overnight, leaving the greenback hovering near a late-January, almost four-year low. BofA said the absence of fresh catalysts points to choppy, two-way dollar trading with a mild bearish bias ahead of key U.S. data. Markets are now focused on December retail sales due Tuesday, followed by January nonfarm payrolls on Wednesday and CPI inflation on Friday.
The data will be closely scrutinized for signals on interest rates, as markets remain on edge over U.S. monetary policy following President Donald Trump’s nomination of Kevin Warsh to succeed Jerome Powell as Fed chair. Warsh is seen as a less dovish choice, a perception that has already fueled a sharp dollar rebound and weighed on Asian currencies.
Asian currencies firm, with the yen holding on to post-election gains.
Asian currencies broadly strengthened on Tuesday, led by the Japanese yen, with USD/JPY down 0.3%. The yen extended gains for a second session after renewed government warnings on possible currency intervention, helping it shrug off lingering concerns over Japan’s heavy debt burden despite Prime Minister Sanae Takaichi’s landslide victory. Her ruling coalition’s supermajority gives room for expansive fiscal and budget reforms, including higher spending and tax incentives.
Elsewhere, the Chinese yuan rose, with USD/CNY down 0.2% to its strongest level in over 2½ years, supported by firm midpoint settings from Beijing ahead of upcoming CPI data. The Australian dollar slipped 0.1%, paring gains after hawkish RBA comments, while BofA warned the Aussie’s rally may be overextended. The Singapore dollar was flat despite stronger-than-expected Q4 GDP, while the South Korean won and Indian rupee edged higher, though the rupee remained above 90 per dollar.
Sources: Ambar Warrick
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