Most Asian currencies traded in a narrow to slightly weaker range on Thursday, as the U.S. dollar found modest support ahead of a closely watched U.S. labor market report scheduled for later in the week.
The Japanese yen and Chinese yuan remained largely rangebound, as diplomatic tensions between Tokyo and Beijing showed little sign of easing. Reports indicated that China introduced fresh restrictions on Japan during the week, weighing on sentiment toward both currencies.
The Australian dollar weakened after retreating from a 15-month high, following November trade figures that came in below expectations. Data showed that exports declined and the country’s trade surplus unexpectedly narrowed, pressuring the currency.
Across the region, Asian currencies generally softened as investor risk appetite remained fragile amid elevated global geopolitical tensions. Markets were also cautious ahead of key U.S. economic data, which kept traders on edge throughout the session.
Yen and yuan stay subdued amid diplomatic strain
The Japanese yen’s USD/JPY pair hovered near the 157 level, while the Chinese yuan’s USD/CNY pair edged down 0.1%, holding close to its strongest level in roughly two and a half years.
The yen remained under pressure after data revealed that overall wage income for Japanese workers grew far less than anticipated in November. Persistently weak wage growth complicates plans by the Bank of Japan to normalize monetary policy and raise interest rates.
Market sentiment toward Japan and China was further dampened by an ongoing diplomatic dispute linked to comments made by Japanese Prime Minister Sanae Takaichi regarding Taiwan in late 2025. Tensions escalated after China reportedly restricted shipments of goods with potential defense applications to Japan and launched an anti-dumping investigation into certain Japanese chipmaking materials.
Chinese media outlets also suggested that Beijing is considering limits on rare earth exports to Japan, a move that could pose serious risks to Japan’s manufacturing sector if implemented.
Dollar edges higher as payrolls data looms
The dollar index and dollar index futures posted mild gains during Asian trading, building on strength seen in the previous session. Weaker-than-expected private payrolls data for December and softer job openings figures for November fueled speculation that the upcoming nonfarm payrolls report could also disappoint.
However, strong readings on U.S. business activity pointed to the economy ending 2025 on a solid footing, leaving investors uncertain about the next steps from the Federal Reserve. Labor market conditions and inflation remain the central bank’s primary focus, with Friday’s jobs report likely to influence future policy expectations.
Asian currencies mostly moved sideways as traders awaited the U.S. data release, while renewed geopolitical anxiety following a U.S. military incursion in Venezuela added to market unease. Reports suggested that Washington was preparing a long-term strategy to take control of Venezuela’s oil industry, a development that could increase political instability in the region.
Among regional currencies, the Singapore dollar weakened slightly, with USD/SGD rising 0.1%, while the Taiwan dollar slipped further as USD/TWD gained 0.4%. The South Korean won traded flat, and the Indian rupee hovered just below the 90 level against the dollar. Meanwhile, the Australian dollar extended its pullback, with AUD/USD slipping 0.1% following weaker trade data.
