Most Asian currencies traded within narrow ranges on Wednesday, as the U.S. dollar stabilized following a strong advance over the past week. In contrast, the Japanese yen underperformed, with markets turning cautious ahead of a snap election expected in the coming days.
Regional investors continued to assess the implications of U.S. President Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve Chair, focusing on how a potential leadership change at the Fed could influence future interest rate policy.
The Indian rupee remained relatively supported after the announcement of a U.S.–India trade agreement earlier this week. Meanwhile, the Australian dollar held on to strong gains recorded on Tuesday, after the Reserve Bank of Australia raised interest rates and signaled a more hawkish policy outlook.
The Japanese yen hovered near a two-week low, with the USD/JPY pair climbing nearly 0.4% on Wednesday to its highest level in almost two weeks. Renewed pressure on the yen followed comments from Prime Minister Sanae Takaichi, which fueled uncertainty over whether Japanese authorities would step in to support the currency.
Attention is now firmly on the snap lower house election scheduled for February 8. Takaichi’s party is widely expected to secure a solid victory, potentially strengthening her control over Japan’s parliament. A stronger majority would give the prime minister greater flexibility to pursue expansionary fiscal policies, which have weighed heavily on the yen in recent months.
Market participants remain concerned that increased government spending could further strain Japan’s already elevated public debt. These fears recently triggered a sell-off in Japanese government bonds, adding further downside pressure to the currency.
The U.S. dollar was little changed in Asian trading, with the dollar index consolidating after rebounding sharply from four-year lows. A brief U.S. government shutdown had minimal impact on the greenback, as lawmakers approved additional funding earlier this week.
The dollar’s recent strength followed Warsh’s nomination, as he is viewed as less dovish than markets had anticipated. However, investors are now awaiting confirmation by the U.S. Senate and seeking clarity on how his appointment could shape interest rate policy. Current Federal Reserve Chair Jerome Powell’s term is set to expire in May.
Markets are also focused on upcoming U.S. economic data, with January nonfarm payrolls figures expected to provide fresh direction for rate expectations.
Across Asia, the USD/INR pair stabilized around the low-90 level after retreating from recent record highs, with attention shifting to the Reserve Bank of India’s policy meeting on Friday. The Australian dollar remained firm following the hawkish RBA decision, while the South Korean won edged slightly weaker.
The Chinese yuan held near its weakest level since mid-2023, while the Singapore dollar advanced modestly. The Taiwan dollar was largely unchanged during the session.
