Most Asian currencies traded within narrow ranges against the U.S. dollar on Monday, as investors remained cautious ahead of key U.S. labor market data scheduled for later this week. Market participants largely avoided taking strong positions, while the Australian dollar climbed to a 15-month high following inflation data that supported a hawkish stance from the Reserve Bank of Australia.
Despite rising global geopolitical tensions, regional currencies stayed relatively stable. Traders appeared to look past escalating friction between China and Japan, as well as developments surrounding U.S. actions in Venezuela, choosing instead to focus on upcoming economic indicators.
Attention this week is firmly on a series of major economic releases from both the United States and Asia. These reports are expected to offer fresh insight into growth, inflation, and monetary policy direction across the world’s largest economies.
Australian dollar reaches 15-month high on sticky inflation
The Australian dollar strengthened further, with the AUD/USD pair rising 0.3% to its highest level since October 2024.
The move came despite headline consumer price index data for November coming in below expectations, reflecting weaker retail spending and lower electricity costs. However, underlying inflation showed little improvement from the previous month and remained well above the RBA’s 2% to 3% target range.
The data suggested that inflation pressures in Australia are easing only slowly. This reinforced expectations that the Reserve Bank is unlikely to cut interest rates in the near term.
Analysts at ANZ said the central bank is expected to keep rates unchanged at its February meeting, with discussions potentially turning toward rate hikes later this year. Their base case remains that rates will stay at 3.60% until sometime next year.
Dollar weakens ahead of U.S. labor data
The U.S. dollar edged lower in Asian trading, with both the dollar index and its futures slipping 0.1%. Traders grew increasingly cautious ahead of a busy week for U.S. labor market data.
Markets are closely watching December’s nonfarm payrolls report, due on Friday, as labor market strength plays a crucial role in the Federal Reserve’s interest rate decisions.
Geopolitical developments also weighed on sentiment. President Donald Trump stated that Caracas had agreed to supply between 30 million and 50 million barrels of oil to the United States following Washington’s capture of Venezuelan President Nicolas Maduro last week.
Asian currencies saw only limited benefit from the softer dollar, as overall risk appetite remained subdued.
The Japanese yen attracted some buying amid speculation over further interest rate hikes and potential currency intervention by the Bank of Japan. Meanwhile, tensions between Japan and China intensified after Beijing restricted exports of goods with possible military uses. The Chinese yuan remained steady, holding near its strongest level in more than two years.
Elsewhere, the Singapore dollar edged higher, while the South Korean won and Taiwan dollar were largely unchanged. The Indian rupee continued to trade above 90 per dollar, as uncertainty persisted over trade relations with the United States and existing 50% tariffs remained in place.
