Asian currencies traded in a narrow range on Monday, while the U.S. dollar edged lower after U.S. authorities launched a criminal investigation involving Jerome Powell, raising fresh concerns about the independence of the Federal Reserve.
The U.S. Dollar Index, which tracks the greenback against a basket of major global currencies, slipped 0.2% after touching a one-month high. U.S. Dollar Index futures were also down by 0.2% as of 04:27 GMT.
Powell investigation unsettles markets
Market sentiment weakened after Powell revealed that the administration had warned the Federal Reserve about a possible criminal indictment tied to his Senate testimony. The testimony focused on cost overruns connected to renovation work at the Fed’s headquarters.
These developments dented confidence in U.S. institutions and prompted a cautious tone across global markets, curbing risk appetite throughout Asia.
Most Asian currencies remained subdued under this backdrop. The Japanese yen saw the USD/JPY pair rise 0.2%, while the Singapore dollar’s USD/SGD pair was largely unchanged. The South Korean won stood out, with the USD/KRW pair jumping 0.7%.
In China, the onshore yuan (USD/CNY) was little changed, while the offshore yuan (USD/CNH) edged 0.1% lower. The Indian rupee’s USD/INR pair also showed minimal movement. Meanwhile, the Australian dollar strengthened slightly, with AUD/USD gaining 0.2%.
US payroll data boosts rate-cut expectations
Investor sentiment was further shaped by U.S. economic data released on Friday, which showed that nonfarm payroll growth slowed more sharply than expected in December.
The weaker labor market data reinforced expectations that the Federal Reserve could begin cutting interest rates later this year. Markets are now pricing in at least one additional rate cut in 2026, with some investors anticipating two reductions.
Attention now turns to the U.S. consumer price index for December, scheduled for release on Tuesday. The inflation report is one of the key indicators ahead of the Federal Reserve’s upcoming policy meeting later this month.
